Post navigation

The Smartphone Wars: multicarrier breakout fail

The news is out that Verizon sold 2.2M iPhones in the roughly 60 days from product launch to their quarterly report. I’ll fess up; this is well over what I was expecting, based on the reports of unimpressive first-week sales.

But I also underestimated Android new-unit sales by a larger factor. Even on the very optimistic assumption that Verizon sustains its pace through Q2, Android phones are selling so much faster in aggregate (ratio of about 10:1) that iPhone 4V is barely going to budge the needle on the market share numbers (if that). Focusing too much on the the quarterly numbers is ignoring the forest for the trees.

Forest vs. trees notwithstanding, I’m going to be scrupulous about pointing out the possible ramifications of my mis-forecast now so there won’t be any accusations later that I’ve tried to sweep it under the rug. 2.2M units in 60 days means the plausible range for Q1 and Q2 together tops out at about 6M units; a more realistic estimate would be 4M (which is in line with Piper Jaffray’s launch-day prediction that I was skeptical about; props to them). They’re likely to beat 2.6M that I set as a threshold for “anemic” pretty easily, like in another three weeks. And if Android volume now had been where I thought it would be when the iPhone 4V launched, this would be pretty serious news. But it isn’t; it’s much higher.

The iPhone didn’t need just moderate success on Verizon, it needed the massive multicarrier breakout various Apple fanboys were confidently and gloatingly predicting for over a year on this blog. It needed to rack up sales numbers high enough to exceed Android’s growth over the same period to dent Android’s momentum. That didn’t happen, and quibbling over the odd million or two error in unit sale projections is not going to change the fact that it didn’t happen.

In fact, it didn’t even come within an order of magnitude of happening. 6 million units, the top end of the now-plausible Q1+Q2 range, is – depending on how you predict rate of growth in Android activations – between 14 and 17 days of Android sales.

The only plausible comeback scenario for the iPhone after Android blew past it in November 2010 was that there was huge demand for the iPhone being pent up by customers’ inability to use it off AT&T’s network. In this narrative, customers were merely settling for a cheap substitute that they would drop like a rock when the real thing became available.

This fantasy is now dead. Over the last two months, both the total volume of Android sales and the rate of Android growth have exceeded corresponding figures for the iPhone by brutally large margins. The long-awaited multicarrier breakout was a strategic fizzle. And the news from outside the U.S., where Apple’s market share has been nosediving over the last year, is worse.

Accordingly, I no longer think there is any plausible scenario under which Android fails to achieve over 50% smartphone market share in the U.S. and worldwide this year. If Apple couldn’t spike the wheels on this juggernaut, there is no hope that RIM or any of the minor players is going to do it. And to give you an idea how robust that prediction is, Android could still beat 50% in the U.S. if its growth rate dropped by a full third.

Now add to this the fact that Apple’s smartphone market share has been essentially flat for two quarters. That’s a very bad sign in a market where returns tend to increase with scale and both gains and losses in share are self-amplifying. Apple is balancing on a knife edge.

I think we’re looking at the end stage of a successful technology disruption on the classic pattern. The question is no longer whether Android can be stopped, but when Apple’s market share will fall off a cliff. I think that could easily happen as soon as the next 90 days; one of the patterns in technology disruptions is that collapse often follows the victim’s best quarter ever.

But I could be way wrong about that short-term prospect without changing the overall picture. It wouldn’t be sufficient for Apple to gain a few points of share from the Verizon iPhone; it would have to substantially beat Android’s overall growth rate, which means pegging at least a 7% share increase. And that is not going to happen.

Interesting, but why it is relevant to look only at smartphones? For me, as a developer, what matters is the relative success of the App Store and the Marketplace. And then looking only at iPhones is too limited – the iPad and especially the iPod touch matter too.

And I worry about the propensity of Android users to spend money on apps. I’m following the growth of Android with great interest, but don’t think that the time has come to say that developing for Android gives a better ROI than developing for ios.

Is this comparing the hypothetical 6M Verizon iPhones over Q1 & Q2 with entire Android growth? Or are you already breaking out Android growth on Verizon for a same-carrier comparison?

@Patrick

Sales of those [iPods] are slowing.

Not to be hyperpicky, but does this account for the possibility that overall iPod touch sales may be increasing (or gaining a greater % of iPod sales) at a greater rate than the overall decrease in iPod sales?

That is, what if the decrease in sales is among the MP3 iPods but not among the touch? I didn’t think Apple broke out the iPod touch, which is definitely intentional, but that doesn’t necessarily mean they do it to cover up bad news (worse than admitting that the iPod market itself is waning).

Yes. You haven’t sprung the trap yet either, but you’re close to it as well.

See, the fantasy I’m murdering is that the end of single-carrier exclusivity in the U.S. was some kind of magical event that would change the whole strategic picture, unleashing huge pent-up demand for iPhone and stopping Android growth not just on Verizon but everywhere. So Android growth everywhere is the right thing to compare to.

Alright. But why wait? Let’s spring the trap with just two carriers, since the implication is that three don’t matter. The question is, why don’t they matter? (This isn’t immediately apparent to me, but hopefully soon).

In a two-carrier setup, imagine that iPhone outpaces Android phones on both Verizon and AT&T. (Verizon is a long shot, but last year’s Q3 supposedly AT&T iPhones outsold every single Verizon phone at a 4:1 ratio.) For trap purposes, grant me what I think is the best scenario you can get, based off http://www.asymco.com/2010/12/13/verizon-strikes-out/.

That is, probably the iPhone was the vast majority of smartphones activated on AT&T at that time. Let’s assume fortune is as golden as it gets, and consider that hypothetically in the coming two quarters, iPhones will make exactly 50% of all total smartphone activations on AT&T and Verizon. [Split the rest with a majority 40% on Android and the rest to Palm and RIM).

I’m assuming then, according to the trap, the truth is that Android growth is actually Big-Two-carrier-independent and will continue to increase in share even *if* the iPhone could slightly-edge out Android activations on the Big Two.

> Not to be hyperpicky, but does this account for the possibility that overall iPod touch sales may be increasing (or gaining a greater % of iPod sales) at a greater rate than the overall decrease in iPod sales?

Quite possibly. As you point out, this is difficult to figure out. However, we already know that non-touch sales have been falling for quite awhile — in fact in early 2008, I think total iPod sales declined until touch took up some of the slack. There is also an interesting number (with good reasoning behind it) that Apple sold 45M iPod touches through calendar Q3 last year:

I think Apple’s sales for the previous two quarters totaled about 28M iPods, (19M + 9M) so for the touch to sell the 15 million units it needed to get from 45M on Sept 1. to 60M on March 31, there must have been 13M non-touch units sold. The 19M is down 7% from previous year, and 9M is down 17% from previous year. If you add the two quarters together for previous year (19M/.93 + 9M/.83) you get 31.27M iPods for the same two quarters a year ago.

If you believe the 15M number, and believe that that held steady (never mind rose) then non-touch iPod sales declined by 1 – (28-15) / (31.27-15), or 20% overall, in the half of the year that includes Christmas and post-Christmas sales.

This is certainly plausible, but it seems unlikely to me, especially as the smaller ones make great stocking stuffers. It sure would be great to get some ASP numbers or something that let you do a better job of figuring out the split.

>I’m assuming then, according to the trap, the truth is that Android growth is actually Big-Two-carrier-independent and will continue to increase in share even *if* the iPhone could slightly-edge out Android activations on the Big Two.

No. In order to prevent a lot more running down blind alleys, I will now reveal the trap. The Android activations figure includes tablets. The fanboy response to this is likelly to be “No fair! You included tablet activations against smartphones only!”, and the jaws of the trap close at that point. You see, fanboy then either has to admit that Android tablets are selling in volume large enough to swing the numbers (vile heresy! the iPad is the one true and only) or admit that the comparison is fair.

Fanboy then either has to admit that Android tablets are selling in volume large enough to swing the numbers (vile heresy! the iPad is the one true and only) or admit that the comparison is fair.

I was running to the wrong trap apparently. I was probably misled by my assumption that you normally wouldn’t argue the device-market-agnostic perspective, as you’ve previously emphasized how singularly important you think smartphones are to the future of mobile tech. Sounds like quite an intricately crafted gambit though. :)

I think Apple’s sales for the previous two quarters totaled about 28M iPods, (19M + 9M) so for the touch to sell the 15 million units it needed…there must have been 13M non-touch units sold

Assuming the 15M is an accurate base (working back from 60[court] – 45 [asymco's reasoning last year]), we could compute the new touch percentage, where 19x + 9x = 15, where x would be the percentage of sales (hypothetically) for iPod touches out of iPods, and works out to around 53%.

That seems to be up from 37% reasoning a year ago. So, for a comparative decrease a year ago of all iPods (from 31.3 to 28 or a 10.5% decrease in all iPods overall), the iPod touch grew (hypothetically) from around 12.5M (31.3 * 40%, assuming the average sales matched the average sold at that time) to 15M now. That would seem to indicate that the iPod touch is growing but at a slightly lower rate than the iPod market as a whole.

(That math may be highly circumspect. I think it would be more accurate to use the lower 40% for iPod touch sales for last year’s Q4 & Q1 rather than the 53% implied by the 15M this year, as the touch was likely a lower percentage of total units sold at that time.)

esr, Why do you insist on using the iPhone V nomenclature for the CDMA iPhone 4? This is the only place I’ve seen that terminology. Right now it is mildly annoying. Once Apple actually releases a product called ‘iPhone 5′ your usage will just foster confusion and misunderstandings here for no particular reason that I can discern.

>The iPhone didn’t need just moderate success on Verizon, it needed the massive multicarrier breakout various Apple fanboys were confidently and gloatingly predicting for over a year on this blog.

I think at this point you have made yourself ridiculously vulnerable to a charge of goalpost-moving, just as much as the pro-apple guys who switched the target market share to profit share. But kudos for fessing up to the missed prediction.

On a related note, I think you should beware the term ‘fanboy': fanboys tend to be hyper-sensitive to fanboyism on the opposing side, and so the first person to throw the term around (indeed, *every* person who uses the term) tends to reveal a certain fanboyish quality in him- or herself.

Dang you, @esr, for being so reasonable – I was going to bring up the generally non-anemic Verizon (and Verizon+AT&T) sales figures but (a) I was having trouble finding your exact prediction, and (b) you brought it up first!

>I think at this point you have made yourself ridiculously vulnerable to a charge of goalpost-moving

I tell you what. Check back in 90 days. If Verizon iPhones have gained Apple enough share to even close half the distance to Android, then you’ll have had grounds to accuse me of moving the goalposts. Until then, you just look like a silly fanboy. Yes, I said ‘fanboy’. Phphphpht!

/me is enjoying the discomfiture of the Apple cultists more than is probably good for his karma.

>why are we comparing sales numbers to activation numbers? (i’m new here)

I’m doing it because (a) the Android market has so many players that aggregate sales numbers are almost impossible to get exact, and (b) activation numbers probably understate sales – I, for example, have activated only once and have three phones. Thus, if Android activations beat Apple sales, we can be very confident that the actual sales difference is higher.

>His point is that he’d have been counted 3 times in sales figures but only once on activations.

I’ll be scrupulous again and point out that this isn’t true in my individual case. I bought one, Google gave me a second, and a friend lent me the third. So I wasn’t counted three times, but I illustrate the likelihood that activations will undercount frequent upgraders.

Disclosure: I don’t do this very often. Usually I reason from clear statements in the English language that contain numbers, and not the raw, only vaguely described numbers.

As near as I can figure, by selling iPhones, Verizon went an extra billion or so in the hole, for an extra few hundred thousand customers (maybe half a percent or so in customer base) over what they probably would have gotten anyway, an average postpaid revenue per user increase of approximately nothing ($53.45 to $53.52) and a corresponding overall wireless income drop of $500E6, corresponding to a margin decrease from 30.1% to 25.8%.

Of course, part of the problem is that they just started selling the iPhone mid-quarter, and all the expenses are front-loaded. Also, there could be extenuating circumstances I’m missing, but nonetheless, it seems like around 80% of the increased equipment revenue and just about all of the increased expenses from last quarter would have been from the 2.2M iPhones, and it barely budged the customer needle (of the 906k postpaid adds, 364k were tablets, wifi hotspots, and sundry “internet”, leaving 542k postpaid cellphone adds, which is not out of line with what they were averaging).

I’m no analyst, but for a company that’s increased smartphone (and presumably dataplan) customers by 4%, this seems like a lot of cost and effort for not much return. Presumably they were hoping to pull a lot more AT&T customers.

I think it’s pretty obvious they’re now trying to discourage iPhone uptake when you look at their current smartphone offerings, and realize you can get a brand new Android phone on contract for free.

It will be interesting to see if Sprint has the same take-away or if they feel compelled to carry the iPhone too.

One other note on Verizon’s financials is that they seem to be bleeding prepaid (or converting them by offering smartphones under contract). Not like the other networks which have embraced prepaid as a necessary evil going forward.

AT&T’s looking pretty smart right about now. Their operating margin due to discounted iPhones is almost identical to Verizon’s. The difference is that AT&T so far is keeping all their customer gains, while Verizon was apparently chasing illusory disgruntled AT&T customers.

AT&T seems to have executed well on the iPhone — they got in, managed to collect all the non-price-sensitive smartphone customers before Android even took off, then spent a bit extra to lock in their price sensitive customers on contract when their exclusive was disappearing, and have been ramping up their Android offerings rapidly to compete on that front as well.

Interesting; that tells us that the margins on their iMac business are not very good compared with their smartphone business. I suppose that shouldn’t surprise me, given the multiple revenue streams coming from the iOS ecosystem. This has real implications for Apple’s future strategy, because it means that it will be difficult to retreat out of the smartphone business and go pioneer another new technology somewhere, which has been Apple’s behavior for success recently. Have they been “captured” by their iPhone business in the same way that Microsoft can’t attempt to get into a new business without trying to inappropriately jam Windows into it?

>AT&T seems to have executed well on the iPhone — they got in, managed to collect all the non-price-sensitive smartphone customers before Android even took off, then spent a bit extra to lock in their price sensitive customers on contract when their exclusive was disappearing, and have been ramping up their Android offerings rapidly to compete on that front as well.

That’s the way I read it, too. You may recall that I muttered something when the exclusive dissolved early to the effect that AT&T must think iPhone has lost its mojo. Credit to them; they figured that out a while before I did. I mean, I thought Android was going to win, but I overestimated Apple’s brand strength in a way they clearly did not.

The iPhone isn’t as seasonal as some of the other devices Apple sells. That’s one reason they were so exposed this quarter vs. last.

My last post theorized that Verizon wasted a lot of money to subsidize 2.2 million iPhones for customers who probably weren’t going anywhere anyway (all the ones that really had to have iPhones left for AT&T long ago) and so Verizon didn’t really get anything for their money.

It’s no wonder Apple’s looking at a quick and dirty iphone spin to get the cost of goods down, and no wonder they are rapidly expanding internationally — I thought the domestic market was fairly saturated before, but after all those sub $50 iPhones on AT&T, and Verizon finally bringing the iPhone to flyover country, and the carriers not seeing those huge subsidies actually move the needle, and the inexorable wholesale price decline in Android handsets, I think the price of acquiring an iPhone vs an Android phone in this country is going to be rising rapidly.

>Interesting; that tells us that the margins on their iMac business are not very good compared with their smartphone business.

You’re almost certainly right. Competition from PCs has been lowering the premium they can charge on Macs for much longer than the iPhone has had competition.

>This has real implications for Apple’s future strategy, because it means that it will be difficult to retreat out of the smartphone business and go pioneer another new technology somewhere

I concur. This is exactly what I meant by “more exposed than I thought” – unless Apple has a cash hoard nine times the size of God’s squirreled away somewhere a disruptive collapse of their iPhone business would leave them without much of a recovery path. And Jobs is out of it, or nearly so, so there probably ain’t going to be any more rabbits pulled out of that hat. Shit oh dear; all the elements of a truly spectacular crackup are in place….

>Regardless, these risks won’t stop the zany analysts from predicting that Apple will go to $600 a share

…including that one. This is all sounding eerily familiar from my time in the Valley ten years ago. If I had Apple stock I’d be selling it now.

>It’s no wonder Apple’s looking at a quick and dirty iphone spin to get the cost of goods down, and no wonder they are rapidly expanding internationally

If Apple’s counting on overseas sales to keep their margins up, the Kantar report demonstrates pretty conclusively that they’re fucked. Apple’s share here is holding; its share abroad is declining. And where are they going to find a larger mass of relatively price-insensitive customers than the U.S., anyway?

That’s one of the reasons why Apple let Verizon lead them into that briar patch — Apple’s been locked out of worldwide CDMA markets, so they let Verizon do all the engineering and legwork and pay them handsomely for phones Verizon didn’t even need, and then they get to go conquer new markets in Asia and Africa. Tom Sawyer would be proud. Sometimes I wonder if AT&T and Apple cooked the whole thing up together.

> And where are they going to find a larger mass of relatively price-insensitive customers than the U.S., anyway?

One thing about that China article (in my last comment) that confuses me is the claim that Tim Cook equated $5B with 10% of Apple’s sales for the quarter. One of those numbers is off by a factor of 2, but I’m too lazy to try to figure out which right now…

Um…how? In what universe does Apple think it can win a price war with Huawei et. al.? Because that’s what it would turn into, and nothing in Apple’s DNA equips it to fight one. There aren’t enough positional-goods buyers in places like Rwanda-Burundi and Pakistan for the traditional cream-skimming strategy to net Apple bupkis. Or are you thinking BRICs?

CDMA won’t save the iPhone. The GSM market is almost five times the size of all other cell phone standards combined.

If you want to “win” the smartphone war you have to win in China, India, and Europe. It is there were the massive growth will be next to the USA. Even now the USA only accounts for somewhat less than half of global smartphone sales.

A jump towards tablets will not save Apple neither. That market is smaller and too easily disrupted by competition.

I was amused to find that they’re actually going to try and test their pinch/zoom patent.
I hope to god that samsung’s lawyers get told about Ishii’s AR research. OK so he used blocks, but multitouch was really difficult back then. Going from blocks on a non-touch surface to finger presses on a multitouch surface is not innovative. My first thought on seeing pinch zoom was “hey it’s good to see Ishii’s stuff being used in the real world”.

My first reading of the article was in the assumption that price was the discriminator here, but remembering your recent post regarding GPSD and the Deepwater disaster recovery, I think we should attach far more weight to the line toward the bottom about expanding the software to run in multiple radio networks & protocols. That’s something that couldn’t be done as easily, securely, or cheaply with any closed software.

It does seem like a precarious position. But from the flip side, Apple has managed to drastically increase (double? triple?) their cash-flow by getting in early on an industry that only took off in the past three years. I’m pretty sure that’s something any other company is highly jealous of, and unlikely to be duplicated by any other tech company (or Microsoft, for that matter).

As the iPad is also selling just as fast as Macs as well, it’s not exactly a bad thing that Apple has managed to create new cashflows (even somewhat precarious ones). Is it? On the other hand, reportedly Mac sales are still increasing gradually year over year.

I consider it like going from Caladan to inheriting Dune and a ton of “spice”. Sure, you’re probably going to get assassinated, but hey, you’ve got a ton of spice. It grants you temporary flexibility that’s still beyond most of your competitors.

Linux on the desktop is a very niche thing while iPads are fairly mainstream.

However, measuring by internet stats is likely to be wrong. I suspect that many folks who have linux desktops don’t surf from them because that’s how folks at my work behave. Meanwhile, iPads are becoming popular as “net terminals”.

> However, measuring by internet stats is likely to be wrong. I suspect that many folks who have linux desktops
> don’t surf from them because that’s how folks at my work behave.

It’s probably much less prevalent now due to web designers actually aiming for compatibility these days, but keep in mind many non-Mac non-Windows browsers have an option to report as something other than what they are, including the OS they are running on top of.

I think these days many Linux users take a little more pride in reporting their actual browser/OS, but I bring it up to point out that these kinds of statistics can be wildly skewed by any number of factors.

CDMA won’t save the iPhone. The GSM market is almost five times the size of all other cell phone standards
combined.

I think the consensus here is that, absent some new strategy and new product category, nothing will save the iPhone. However, to keep the stock price up, Apple has to appear to be doing something.

@Ferdi Z.

What about the latest Apple vs. Samsung counter-counter-lawsuits? Will it affect the smartphone wars significantly, if at all?

This sort of lawsuit is merely proof that the dinosaur knows it’s been wounded. At the end of the day, a couple of billion might change hands, which winds up coming out of everyman’s pocket, but that sort of friction in the market is the done thing right now.

@Twilightomni:

It does seem like a precarious position. But from the flip side, Apple has managed to drastically increase (double? triple?) their cash-flow by getting in early on an industry that only took off in the past three years.

True. They now have a stockpile of cash that is roughly the same size as Microsoft’s or Google’s. (Google’s pile is slightly smaller, but at this point, they arguably have more engaged upper management and a more stable business.) And Apple did it with insanely high margins — for an insanely low margin business. Those margins are only going to drop, and fast, unless they retreat to the high end, and quickly. But they still seem to be aiming for volume, which might let them decline slowly, or might distract their attention away from what really needs to be done. As David Packard said, “More companies die from indigestion than from starvation.”

As the iPad is also selling just as fast as Macs as well, it’s not exactly a bad thing that Apple has managed to create new cashflows (even somewhat precarious ones). Is it? On the other hand, reportedly Mac sales are still increasing gradually year over year.

It will be interesting to see if they pick an appropriate time to retrench and say “we’re not playing the volume game any more.” If the cellphone division dwarfs the rest of the company, and wins internal political battles, it could be game over.

I consider it like going from Caladan to inheriting Dune and a ton of “spice”. Sure, you’re probably going to get assassinated, but hey, you’ve got a ton of spice. It grants you temporary flexibility that’s still beyond most of your competitors.

A nice analogy. It only falls apart when you realize that the imminent destruction of the spice fields is a given, and not at all under Apple’s control. Continued support for the House of Appleides requires that the knowledge that the water of life has been applied to the spice fields, and the chain reaction started, be kept a secret as long as possible while they find a new agricultural crop or a new planet.

A little suggestion for disambiguation, Eric. It’s hard to tell whether people are talking about the Verizon version of the iPhone 4, or the speculated iPhone 5, when they say “iPhone V.” I would suggest that people call Verizon’s current iPhone the Vz or 4V or something, because from the comments here, I think some are calling the Verizion iPhone 4 the V and some mean the next model of the phone.

I’m pretty sure esr means the 4 Verizon, but I have to stop and think about it every time I see the term.

@mrgod34: “No self-respecting geek will buy another iPhone now [because of location data logging] which will mean that not only iPhone usage will drop but using an iPhone will be considered a marker of an Apple fanboy or not so tech-savvy people, IMO.”

Unfortunately, a researcher reports that Android also tracks user locations, but at least the implementation is better — the data appears to reside on a server at Google instead of in an unencrypted file on the mobile device. Of course, this doesn’t obviate issues with court orders in civil cases, but at least there should be less of an issue with suspicious spouses or lost/stolen Android phones.

(Hmm, does this mean that a stolen smartphone could be tracked to its current location if it’s switched on?)

“The claim turns out to be that people are *browsing the web* more on iPad than Linux.”

A notoriously unreliable proxy. So much so that the assertion by “Life as we know it” is not just wrong but trollish and culpably dishonest.

Wait, I’m confused. What makes browser use *such* a bad proxy for use that one should assume bad faith here? I know in the bad old days of sites “designed for IE” both Linux *and* Mac users routinely spoofed their signatures – heck, even iPhone browsers did this for a while to avoid getting crippled generic “mobile” websites. But that was a long time ago; other than the occasional privacy nut, who would still be doing that today?

Are you claiming that there *aren’t* more iPad users surfing the web than there are desktop linux users? Are you imagining vast throngs of desktop linux users who never open a browser window? Or do Linux users visit sites so arcane that Statcounter’s “visitor statistics averaged from 3+ million websites” wouldn’t notice them?

> Are you imagining vast throngs of desktop linux users who never open a browser window?

Apart from the “vast throngs” bit (because there aren’t vast throngs of desktop linux users), I making that claim because that’s what I’m seeing.

I, like almost everyone where I work who has a linux desktop, actually have two desktops, one linux, one WinTel. (I’ve seen the same at other companies.) Most of us don’t surf from the linux desktop. In other words, “one desktop/one person” isn’t necessarily true when one of them is linux.

FWIW, folks who I see with a Mac desktop tend to not have a second desktop.

>Unfortunately, a researcher reports that Android also tracks user locations, but at least the implementation
>is better — the data appears to reside on a server at Google instead of in an unencrypted file on the
>mobile device. Of course, this doesn’t obviate issues with court orders in civil cases, but at least there
>should be less of an issue with suspicious spouses or lost/stolen Android phones.
>(Hmm, does this mean that a stolen smartphone could be tracked to its current location if it’s switched on?)

I would imagine pretty much every smart phone maintains some location cache on the device. The here is that Apple apparently screwed up and isn’t purging old data from the cache frequently. By comparison, the Android one appears to keep only 30 days worth of data (https://github.com/packetlss/android-locdump).

As to this sudden and big revelation that these phones are doing this, I thought I recalled something from a few years back about how smart phones basically phones home every once in a while with anonymous location data, particularly with Wi-Fi network information. It was supposed to be so that even if you didn’t have a GPS signal, your phone could still show your location reasonably well from a combination of cell towers and near by Wi-Fi networks. Maybe the story wasn’t wide spread, but that these devices are collecting this information is nothing surprising to me.

Also, I’m not so sure that sending the data to a server at Google is “better” than leaving it unencrypted on the device. Recall that in its default configuration, the only way to access that file on the iPhone would be to have physical access to the phone, or physical access to the computer the phone is synced with, both of which probably have much more damning information on them than your cell phone location history. And me personally, I’ve always preferred to keep my data on my computer or under my control and not on someone else’s system.

As to your parenthetical I’m fairly certain that has been possible for a long time, even before the smart phone revolution

A random mostly on topic thought. One very big hurdle Apple faces right now is that the iPhone’s success is at least partially based on the actions and behavior of another company. Apple learned this lesson way back with the PPC architecture and how dangerous a “strategic partnership” can be. Unfortunately, right now, to get an iPhone, you have to get cell service, and to do that you have to choose AT&T or Verizon. And in a way, walking into AT&T or Verizon stores to buy an iPhone is just like walking into the CompUSA of yore to buy a mac. A couple demo models in a sea of other stuff, and mostly uninterested sales guys looking for the quickest and easiest sale. Against all odd, Apple took the risk of opening up retail shops of their own to control the presentation and started doing a whole lot better. When they didn’t have to rely on other people to sell their product, they became much more successful.

I think Apple needs to do the same with the iPhone. They need to break the ties to the carriers, and get the price of the phone down into the iPod touch range. They need to take advantage of the rules requiring verizon to allow any device, and of the nature of SIM cards, and start selling it unlocked and and carrier free. Instead of buying a new phone from verizon or AT&T, you buy your new (next) iPod, and if you happen to want cell service on it, you drop in your SIM card, or call up the provider of your choice and have them turn it on. They need to get the purchase of the phone out from under the requirement to buy whatever expensive plan the cell companies have dreamed up.

I think Apple needs to do the same with the iPhone. They need to break the ties to the carriers, and get the price of the phone down into the iPod touch range. They need to take advantage of the rules requiring verizon to allow any device, and of the nature of SIM cards, and start selling it unlocked and and carrier free.

You and I would prefer that, but the general public wouldn’t. Look at the complaints about the iPhone’s initial $500 price tag; when they “cut” it to $200 it took off, even though AT&T raised the monthly rates so you actually paid more over the two year contract.

Google also tried that strategy with the Nexus One and failed. I with they had put a link next to the $530 price tag with a label like “why so expensive?”, leading to a simple table showing that you’d actually save money with T-Mobile’s contract-free service. But the carriers have trained most people to expect phones to be “free” or “cheap”, and to accept higher fees and ETFs and usage restrictions.

@tmoney, I think Apple’s already done quite a lot to break the traditional carrier model. Before the iPhone+App Store, selling mobile apps directly to the customer without the carrier’s involvement was just about unheard of in the US. It also appears that their next model is going to be capable of both CDMA and GSM, and once they’ve managed to handle their supply constraints, I would expect them to go ahead with an “any carrier that wants to play” model like you’re calling for.

> I would expect them to go ahead with an “any carrier that wants to play” model like you’re calling for.

Yeah, but do the other carriers want to play? Subsidizing Apple customers is expensive, so I think Sprint, for example, might prefer not to do that (although I’m sure they would certainly be willing to allow Apple handsets on the network).

As tmoney pointed out in a comment on a previous post, this speeds up carrier disintermediation. Now may be a good time to do it. Just as AT&T surged ahead by being at the forefront on smartphones, Sprint may be able to surge ahead by disintermediating itself first and riding the price curve down more gradually while picking up subscribers before the others figure it out.

But really, that doesn’t disintermediate the carrier so much as intermediate Apple as a fairly standard MNVO. It might be a reasonable thing for them to do, since (unlike the carriers) they have a vested interest in selling iPhones, but it doesn’t render the carrier obsolete.

From this consumer’s perspective, the google voice thing is much more appealing.

@Patrick Maupin wrote: “Speaking of ‘breaking the traditional carrier model,’ Sprint, as the underdog, is at the forefront of some of that, with carrier integration of google voice officially officially going live on the 26th, but apparently already working for some users.”

I expect the merger of T-Mobile into AT&T to be a positive shot in the arm for Sprint. Those consumers who think the pricing of the Big Two is outrageous are about to lose the T-Mobile option, while MetroPCS doesn’t really have the coverage to be a significant competitor.

Sprint, on the other hand, is well-positioned with its Virgin Mobile USA and Boost Mobile sub-brands to get a wide range of smartphone users, especially first-time owners who want to tiptoe into a warm pond instead of jumping into a cold shower. We’ve seen in these discussions that the real growth opportunity in smartphones is getting those dumbphone users to upgrade.

I hope that at some point Eric gives us an update on his “I actually like my [T-Mobile] cell carrier” blog entry, once the merger fully takes effect. Will most T-Mobile users stay with AT&T, or will the ones in Sprint coverage zones bail out en masse? Is there a market opportunity for Sprint to reach out directly to T-Mobile refugees?

@Cathy: “Hmm, does this mean that a stolen smartphone could be tracked to its current location if it’s switched on?”

@LS: “Even a dumbphone can be tracked if it’s switched on. The cellphone network finds it every time it’s called, right? At least the closest cell tower is therefore known.”

Yes, but finding the closest cell tower isn’t going to help me get the stolen phone back. Whereas if you could track it within GPS accuracy, law enforcement could trivially nail the person carrying it and therefore remove all incentive to steal these phones; anyone who tried to fire one up would be found if they use it very much.

“Your carrier can also kill it, if you tell them to.”

That prevents theft of my service, but doesn’t get my phone back.

“(If it’s a GSM phone, though, the thief can change the SIM card and send it out of the country, if it’s that valuable.)”

Hmm. Does changing SIM cards break tracking with the phone’s ID? Does a phone even have a unique ID independent of its SIM card? If the thief can swap SIM cards and use the phone with impunity, the tracking is not a meaningful theft deterrent.

For completeness, would the AT&T version of the iPhone 4 be the 4A, while the unadorned “4? refers generically to them both?

It’s a little bit unweildy but thats not in parallel with earlier iphone naming schemes. I’d have to go back and see what(or if) we did to refer to the whole family of iphone 3s (3/3g/3gs) but at a guess i’d say i’d use (iPhone 4/4v).

@Patrick Maupin: Absolutely. Without Apple, there would be no Android.

Sorry, but this is just stupid. Android was born to fight different battle altogether. It was created when everyone still feared Microsoft and prepared to fight Windows CE (later Windows Phone – not yet “7”).

Have iPhone changed Android? Sure! Of course! But to say that “without Apple, there would be no Android”… no, not even close. It sure changed priorities a lot (first development Android models had no touchscreen, believe it or not), but very little of the overall system design.

Yes, but finding the closest cell tower isn’t going to help me get the stolen phone back. Whereas if you could track it within GPS accuracy, law enforcement could trivially nail the person carrying it and therefore remove all incentive to steal these phones; anyone who tried to fire one up would be found if they use it very much.

Actually you’d be surprised. Dumbphones get two pieces of information, a list of nearby towers and their signal strengths. Give them a list of tower locations and you can do a fairly good job of triangulating your position. The trick tends to work better in the city where there’s large numbers of towers in range. The original iPhone had no GPS chip and used this to display location info.

The thing is that dumbphones probably don’t phone home with the information which would make it harder.

(Clarification: Apple released earnings numbers today that look quite impressive, especially considering that in the past their Q1 sales have been about half those of the preceding Q4, maybe because of Festivus presents, but with 50% of their revenue coming from iPhone/iPad…)

Sorry, but this is just stupid. Android was born to fight different battle altogether. It was created when everyone still feared Microsoft and prepared to fight Windows CE (later Windows Phone – not yet “7?).

But that makes no sense.
Smartphones pre-iPhone were completely niche. Microsoft’s winmobile business was going nowhere and doing that slowly. If anything RIM were the mob to beat and neither iPhone nor Android were going for RIMs jugular because of a lack of exchange integration. To say “everyone still feared Microsoft and prepared to fight Windows CE” seems crazy to me since the only thing Windows CE was a threat to was it’s owners social status.

The timeline does debunk the whole “born to fight Apple” idea. Unless Google got insider info, it can’t have known about iPhone when it acquired Android. Considering the precursors to the smartphone wars talked about carrier de-stabilisation that makes sense as the real target. The OHA stated motivation seems to be mostly “we can do better than this” which is also a possible motivation.

However in a world without iPhone, you’d still have to break smartphones out of their niche status. Not impossible but not easy.

[Android] was created when everyone still feared Microsoft and prepared to fight Windows CE (later Windows Phone – not yet “7?).

It was created because of a perceived market opportunity, and later bought by google because of perceived synergies with google’s search business. I challenge you to find any historical account of the early days of Android where fear is mentioned as a factor. In 2004, Windows Mobile had slightly more mobile market share than Linux, but in 2005, Linux was already trouncing it:

So the phone vendors were already doing a good job of disallowing Microsoft a monopoly position in the phone OS market segment. And Microsoft didn’t have even half a credible search engine until Microsoft live launched in 2006, after google bought Android.

Android, and then google, struggled for a long time to gain carrier/handset manufacturer acceptance. Android might have been killed like legions of other Google acquisitions, if Apple’s smartphone hegemony hadn’t posed a serious threat to google’s core business:

Even if I accepted your version of events, which I don’t, why it was born is completely irrelevant to the reasons why it’s still alive today.

[Apple's influence on Android] sure changed priorities a lot (first development Android models had no touchscreen, believe it or not), but very little of the overall system design.

When I say “without Apple, there would be no Android” I’m not saying that there never would have been any version of Android coded up and lamely marketed. But when Eric blogs about “The Smartphone Wars” he is creating discussions about the rough and tumble of the markets, not laboratory curiosities.

Sorry, but this is just stupid.

To get to the “smart asshole” category, you’ll have to come back with well-reasoned arguments about how Android would be well-known and relevant today even without Apple’s foray into the cellphone business. Until then, you’re just in the plain vanilla “asshole” category.

@JonB:

However in a world without iPhone, you’d still have to break smartphones out of their niche status. Not impossible but not easy.

Exactly. Apple spent a lot of time and energy on this because they wanted to sell the hardware and build the ecosystem badly. Given the rate at which google was buying and shutting down small companies, it is unclear they would have had the will to follow through with hardball carrier negotiations.

Anyway, it appears the market certainly figures AAPL for some volatility, if you look at the current option prices. It would probably be pretty hard to make money by betting against Appleunless you took the bull by the horns and shorted it, and had enough capital reserves to ride it out for a couple of quarters, or limited your upside potential by hedging.

One thing I was trying to figure out was how many of the 3.6M AT&T iPhone activations were refurbished units. I saw one estimate of 300K for that, but I think that might be low, looking at AT&T’s financials.

Then I got to thinking about Apple and the refurbished market in general. There are lots of people that have to have the latest gadgets; apparently pristine used iPad 1s are plentiful, for example.

I’m still trying to figure out if the presence of so many used/refurbished Apple products hurt Apple or Android worse. Sure, they train consumers in the Apple way, but if you buy a used iPhone for $20 with a 2 year contract and it goes on the fritz one month after the 90 day warranty expires, maybe you’re not replacing it with an iPhone.

To the extent they last well, they’re good advertising for Apple, but don’t contribute much to the bottom line otherwise. To the extent they break and piss off consumers, that has to be good for Android. To the extent that more Apple phones get recycled than Android phones (I’m guessing), it means that Android manufacturers have to build more phones than Apple to get the same number in the installed base — this is just one manifestation of the situation where the average operational lifespan of one manufacturer’s product is longer than the operational lifespan of another manufacturer’s product.

If Apple can keep the build quality up, and keep the lifespan long and the resale value up, then in some ways, it starts to look like the kind of automobile that people buy for 3 years and then trade in. In that case, it can still command a premium, as long as there are teaming masses willing to buy a used iPhone rather than a new Android.

“Hmm. Does changing SIM cards break tracking with the phone’s ID? Does a phone even have a unique ID independent of its SIM card? If the thief can swap SIM cards and use the phone with impunity, the tracking is not a meaningful theft deterrent.”

Yes, every phone has a unique ESN (aka IMEI). The carriers use that to identify the phone, and if the system involved is CDMA or TDMA, that’s all they have; they use it for billing purposes.

OTOH, if the carrier uses GSM, then the phone has a SIM card, which can be used to identify *you*. (The idea is that you can take your SIM card to Lutonia, rent a phone there, and get your calls billed to you at home.) Countries other than the US generally use the GSM system. Sprint and its derivatives here in the US use GSM, and Verizon and AT&T have bought GSM spectrum as well. The various phone companies in developing nations don’t seem to be too scrupulous about checking for stolen IMEIs. (See my previous comment about Tracfone and various Asian immigrant rings.)

In any event, my purpose in bringing up the idea of tracking cell phones was not about how to recover a stolen one. It was to remind everyone that walking around with a cell phone, smart or dumb, is walking around with a tracking device. The US courts have seen this as a serious issue, and have ruled that such tracking can take place, but requires a warrant. Criminals, who by definition don’t obey court orders, might track their victims by corrupting some cellphone employees. Everyone needs to bear this in mind.

Anyway, it appears the market certainly figures AAPL for some volatility, if you look at the current option prices. It would probably be pretty hard to make money by betting against Appleunless you took the bull by the horns and shorted it, and had enough capital reserves to ride it out for a couple of quarters, or limited your upside potential by hedging.

In that article he suggests (in jest) Apple do a leveraged buyout of Google, and could then shut down Android.
But since it’s open source, couldn’t someone somewhere just fork it?

And if you are interested in not losing your ass, do not short Apple, other than as a short term slingshot trade.

> But since it’s open source, couldn’t someone somewhere just fork it?

That’s part of why I thought it must be in jest. The guy who writes it doesn’t seem to be a fool. He’s apparently much better at predicting the ins and outs of Apple stocks than most of the professionals:

> And if you are interested in not losing your ass, do not short Apple, other than as a short term slingshot
trade.

Absolutely. Apple could bleed smartphone market share for the next 4 quarters and still have increasing sales and profit. And, even absent Jobs, they could stumble on some other market to create. I’m not usually that big on betting against companies anyway — just pointing out that, in this particular instance, even if you really truly believe they are going to tumble soon, it would be hard to make money on that belief with an option play, because it’s pretty obvious from option prices that a lot of people are already hedging hard — especially for the medium and longer term options.

For example, if you bought a $300.00 put option for January, it would cost you $16.00. That’s probably only useful in some sort of hedging or straddle strategy — to make money exercising that option, you would need for the share price to drop below $284 by then.

It’s possible that the share price will do that, but I’m not going to bet $16 that could go poof that it will.

Anyway, it appears the market certainly figures AAPL for some volatility, if you look at the current option prices. It would probably be pretty hard to make money by betting against Appleunless you took the bull by the horns and shorted it, and had enough capital reserves to ride it out for a couple of quarters, or limited your upside potential by hedging.

What’s interesting to me is that the market appears to be particularly edgy about the current quarter’s sales; the premiums are middling for the next couple of months and then skyrocket for the month after the next earnings report. People aren’t getting out–and I’m certainly neither rich or foolish enough to try shorting Apple–but premiums suggest some people are suspecting a major haircut in three months.

Unlike some Apple fans around here, I never thought Android was “doomed” by a Verizon iPhone or by anything else. It’s always seemed obvious to me it would have a place in the market. But I think all the talk of the iPhone being doomed by Android’s success is equally wrong. Some of the assumptions I see: Apple can never compete on price. Apple will never accept slimmer margins. Once someone buys an Android phone, they’ll be happy and stick with Android forever. The iPhone and App Store will always be walled gardens. In this thread, though, the strangest belief is that the ever-growing mountains of money Apple is making from the iPhone and the whole iOS system is some sort of sign of imminent decline.

@PapayaSF:
“Some of the assumptions I see: Apple can never compete on price. Apple will never accept slimmer margins. Once someone buys an Android phone, they’ll be happy and stick with Android forever. The iPhone and App Store will always be walled gardens.”

The main reasoning is that Apple will never be able to supply 5 billion handsets to convert all mobile handsets. Android will. So in the end there will be hundres of millions of iPhones and billions of Android phones.

I think all the talk of the iPhone being doomed by Android’s success is equally wrong.

No one is saying that iPhone is doomed. The iPhone is no more doomed than the Macintosh ever was. As Winter says, Apple can ‘t supply enough units to reach the TAM, nor, as you say, will they ever be able to compete with Android in terms of price. Take that to its logical conclusion: Apple will be selling phones aimed at specific niches in the high end of the market, Aiming deliberately for such market segmentation is a hard line to tow, but it’s one strategy that Apple has been traditionally good at.

If they can pull it off, they’ll continue making decent money with fat margins. If whatever niche segments Apple tries to hold onto collapses (something that has happened before), however, the fact that 50% of their revenues are coming from iPhone sales will prove to be disastrous for Apple as company. This is precisely what happened to Apple during their down years, and Apple may be seeing a similar drought in the future.

My error. I should be wary of dashing off replies at one in the morning.

But basing such an assertion on browser statistics is still trollish and tendentious to the point of dishonesty. Even if you discount Linux users modifying their user-agent field (which you shouldn’t) one entirely sufficient reason for this is NAT. I currently have four desktop Linux machines in my house, down from five because I decomissioned my last 32-bit test box recently. All five presented to a browser as having the single exterior static IP of the network and the only browser that normally runs on any of them is Firefox. Counting by (user-agent, IP) pair, they look like one machine.

Browser-based estimates will understate Linux usage even with respect to Windows desktops, which have for various reasons you should already be aware of less tendency to be found in NATted clusters. They will underestimate particularly badly with respect to carrier-mediated devices like iPads which are easy to count by MIN or ESN.

I own a dozen of the Apple LEAP calls, these are long term options. I own the January 2012s.

Against these, I sell the weeklies or sometimes the monthlies, most of the time these expire worthless. This is known as a call spread.

This is a beautiful trade; it is nicely hedged.
It allows me to be long term long but short term short. I can own the LEAPs and they make me a ton, and by selling the shorter term options I make cash off of those all year long. I make about $500 a week on those. With this trade I turn the option market into my own personal ATM machine.

Some newsletters will charge you thousands of dollars to teach you trades like this.
Feel the love. :)

Winter: Apple doesn’t have to supply a majority of the world’s smartphones to succeed and stay in that business. If Android phones become and stay a majority of the world’s smartphones, I suspect Apple will still be able to make a profit. (And perform its crucial task of giving Android something to copy. ;-> )

Morgan: What “niche segments” collapsed for Apple in the past? In recent years they seem to be able to compete with themselves pretty well: e.g. the iPhone taking sales away from iPods.

In contrast Andorid who had less than 10 of market share in May of last year are now enjoying 25 .While 25 is still a long way from 56 it is the curve of the data that is very worrying for Apple. Mobile web consumption is no longer limited to smartphones and tablets are likely to be one of the biggest factors affecting the market in 2011.Jerry Hildenbrand from has said that whether you look at the numbers by the month the quarter or the year as a whole the trend is the same and if it continues Android will have the majority of the US mobile browser market within a year. If these current data patterns continue in the US it is likely that the Apple OS will hold a similar place in the mobile world that it does in the world of computers a niche alternative and quality OS that exists in a world of its own.GD Star Ratingloading…

Absolutely. As I mentioned, hedging is the only way to play it. Even then, you usually have to have some faith when you start the strategy (which you do — good for you!) I don’t expect anything to go wrong for you, but if Apple completely tanked right after you bought the long term calls, then your long-term calls would expire worthless, and the profit you could make by selling short term calls would be cut drastically.

In any case, the whole reason it works is the perceived volatility in the stock market, and this whole sub-thread started when I responded to Christopher Smith’s question “Eric, while I agree that AAPL is a bad buy now, do you have any predictions for how long it will be before the market wises up to Apple’s exposure?” by explaining that there is not consensus in the market — many players in the market obviously expect volatility in Apple’s stock, but the short ratio shows that hardly any of them have the balls to outright declare war on the stock.

@PapayaSF:
” I suspect Apple will still be able to make a profit. (And perform its crucial task of giving Android something to copy.”

No one ever said otherwise, except that Apple’s financial future is opaque and uncertain.

But it is telling that you too, like all those Apple apologists, are projecting this believe in Apple’s demise, and even joy over it, onto those thinking Android will end up as the dominant platform. Somehow, either you yourself share this fear, or you think your wishes against Android must be mirrored by those not chosing Apple.

But we neither share your fears nor do we want to deny you your choice.

For most of the purposes of this discussion — Who cares. Why is this a significant number for the question of ‘Will Android become the dominant OS in the mobile market’ ongoing discussion. Even more to the point, how does the number of people using iPads to browse websites as compared to the number of people using linux desktops to browse websites relate to anything? (And I agree — the numbers sound really fuzzy as well)

Let’s look at the history here. Oct 2008: ESR gets a G1. GOOG is 359, AAPL is 107 and SPY is 97. ESR posts on the impending doom of AAPL for two and half years, and what happens? GOOG goes to 525 (up 46%) SPY is up 38% over the same period. So GOOG is about to take over the entire phone market and become the dominant mobile computing platform for the next decade and only beats the S&P by 2%/year! Amazing. Poor AAPL. They were only able to bring their stock price to 350, outperforming the S&P by 41% A YEAR over the same period. By the way, both AAPL and GOOG have P/E of about 19.5, so today’s pricing isn’t based solely on kool aid drinkers. To borrow ESR’s term, the same “herd” is buying both securities. What the fandroids don’t understand is the GOOG has serious business pressures as well. Change in management, likely FTC investigation, a move away from the web itself to apps. Android is a defensive effort to keep web traffic moving through the Google ad-based ecosystem. It is not revenue enhancing, it defends revenue. The explains the poor app store. Google doesn’t care about apps right now. This is all baked into the stock prices. Check out the implied vols on the June at the money calls for both stocks. They are about equal (21 an 23 for GOOG and AAPL respectively). If AAPL were in serious trouble and GOOG was all roses, then we’d see it in the implied vol numbers. Google needs to perform at a much better level to maintain the long-term viability of Android as a Google platform.

>“Meanwhile, during that year, iPad usage (not iOS usage, just iPads) now exceeds all desktop Linux usage.”
If you are a applefanboy and believe this source i have some bad news for you. This graph is from the same source: http://gs.statcounter.com/#mobile_os-ww-monthly-200812-201104
in the timeperiod from Dec 2008 to Apr 2011 iOS goes from 32% to 23%.
Android goes from 0% to 15%.

The claim turns out to be that people are *browsing the web* more on iPad than Linux. (And, for that matter, more on iOS than on Android)

There is one good, unbiased and public source of worldwide browser usage available, and that is the stats from Wikimedia. A source of mainstream usage from a top 10 site that really does not have a dog in the fight:

(Note, by the way, the share for desktop Linux: 2.53%. Up from 2% a year ago. But my good friends in the free software fanboy area don’t believe the numbers from Wikimedia, asserting on the basis of nothing at all numbers in the range 5%-10%. When I asked what numbers they would believe, I got no answer.)

“But my good friends in the free software fanboy area don’t believe the numbers from Wikimedia, asserting on the basis of nothing at all numbers in the range 5%-10%.”

I just checked what my version of FireFox is reporting in its user agent string. It does not appear to contain the string “linux” or “Linux”, so I don’t exactly see how the above link would be accurate.

I do 99.9% of my web surfing running Slackware. I do not know if other distributions bother to set Firefox’s user agent string to indicate the running OS.

While i have no information one way or the other on linux desktop share I do know one thing. Any statistic based on browser information is ultimately unreliable, it’s a fundamental technology issue, nothing to do with bias. So in answer to “when i asked what numbers they would believe” i’d answer “Not one based on browser user agent strings”. I’m not sure how you would go about compiling an accurate picture of linux desktop penetration either.

Thinner and lighter, with a bigger screen and a teardrop profile. Near field communications. The home button will be enlarged. Qualcomm’s dual GSM/CDMA chipset. Inductive, wireless touch charging. Oh yes.

>Thinner and lighter, with a bigger screen and a teardrop profile. Near field communications. The home button will be enlarged. Qualcomm’s dual GSM/CDMA chipset. Inductive, wireless touch charging. Oh yes.

This seems quite a bit more like what I would expect Apple to fight back with than the minor spec bump we’ve been hearing about.

The big unanswered question: Yes, GSM/CDMA is quite necessary for Apple to compete internationally while minimizing its SKUs, but what about 4G/LTE capability? Qualcomm’s page on the Gobi chipset suggests it’s 3G only. At this point in the game, not competing in 4G effectively cedes the high-end customers and technology leadership to Android. What is Apple thinking, to allow that to happen?

The big unanswered question: Yes, GSM/CDMA is quite necessary for Apple to compete internationally while minimizing its SKUs, but what about 4G/LTE capability?

Back to The innovator’s dilemma.

Apple has been very good at disrupting existing markets where they can do so by controlling all the variables. Unfortunately, engineering the chipset, having the actual networks ready for the phones nationwide/worldwide, etc. aren’t variables under Apple’s control.

Besides, they want to get the cost down, and there is enough profit for now in customers that have to have the latest Apple gadget — maybe they would leave money on the table if they didn’t do something else before they could do 4G well. On the other hand, if that were their thinking, why would they slip the design past summer? AFAIK, the pieces were already in place…

And it may prove to be worth the wait. TechCrunch contributor Steve Cheney (who nailed the timing of the Verizon iPhone last year), believes that a fall iPhone 5 launch makes LTE much more likely. He currently puts the odds at zero to ten percent for LTE if the iPhone 5 launched this summer (again, not happening), 50 percent if it comes in the fall, and 100 percent if it comes in January.

That article is quite good, discussing Apple’s plans in general. Although I’m not involved in that market segment now, I have worked on chips for the consumer segment in the past. All dates are worked backwards from Christmas, and sometimes the upstream supplier dates are well back into the previous year. Creating a schedule that misses Christmas buying means a one year schedule slip for all involved, which of course means in some cases that you simply scrap the product and start over.

That battery life is more important than a faster cellular data standard that won’t be well-deployed for another 24-36 months.

Absolutely. I don’t expect them to ship 4G in the fall unless they are already testing new lower-power sooper-sekret chips that won’t hit the general market for months (if ever), because I haven’t seen any public information about chips that would meet the required power targets within that time frame.

But worries about battery life only go so far — apparently there are some form-factor design compromises that Apple is unwilling to make that could give them better battery life.

. What the fandroids don’t understand is the GOOG has serious business pressures as well.

I wouldn’t have expected it, but Google’s core business is actually vulnerable if Microsoft keeps up the work they’ve been doing on Bing. I occasionally flip my default search engine from Google to Bing or Yahoo, and Google’s not necessarily producing more useful results than Bing does. Add that to the fact that MS can still make Bing the default search engine on a hell of a lot of machines, and Google’s ad services aren’t the only game in town anymore.

>LTE may not be very useful yet, but not being able to check off that feature box is dangerous to any handset’s positioning.
>Apple is too good at marketing not to understand the issue.

Out of curiosity, what about the past 10+ years of Steve Jobs has led you to believe that Apple would ever add a feature just to be able to check the box? Especially if that feature has potential real world use compromises. Bearing in mind this is the same Apple who released a brand new phone as their first entry into the phone market when everyone was expecting pure failure, and the released it without 3G, MMSMS, physical keyboard and battery compartment, all features which were considered essential then.

>Bearing in mind this is the same Apple who released a brand new phone as their first entry into the phone market when everyone was expecting pure failure, and the released it without 3G, MMSMS, physical keyboard and battery compartment, all features which were considered essential then.

But the competitive environment was different. Then, Apple was really only competing against dumbphones. The iPhone was such a breathtaking Big Thing that just about any design quirk could be sold as “vision”, Jobs being particularly good at that sort of move.

Today, Apple is in a come-from-behind position; Android phones have seized the lead both in market share and technology. For Apple to get the lead back it’s going to have to beat them at the things they do best.

Does that really go far enough, or after further consideration, would you perhaps like to amend your answer to “not one based on web access statistics”?

I certainly wouldn’t disagree with that answer, web access statistics in general are flawed. My original response was more targetted at OS break downs, we can’t trust the User agent string, ergo we can’t really trust the statistic.

This is a strangely persistent belief, considering that the GUI, system architecture, and programming model are so different. I think it’s very parochial and an indication of fanboyism to ascribe anything that looks even vaguely like the XEROX PARC interface to copying Apple.

Yes, because I’ve read what Andy Rubin had to say about the matter. The style of design that led to both the iPhone and Android wasn’t invented by Apple, but rather traces back to the original early-1970s experiments in GUIs – the Alto and Dorado workstations and their kin at Xerox PARC. It’s a shame that you’re so ignorant of history as not to be aware of this, and it’s nothing that has to do with open vs. closed source; those early systems were closed-source too.

So did Google/Android manage to create clone software and hardware that completely blew away Apple’s phone market share from scratch in the 22 months since Apple’s announcement and 16 months since the phone was available? Or were they actually doing useful work in 2003-2007, and if not, why did google feel compelled to buy the company and then pay them to sit around on their asses doing nothing until Apple showed them the One True Way(tm) to build a cellphone?

BTW, an interesting counterpoint to this. the change from OS9 to OSX made Mac OS look and feel so much like Windows NT that i felt cause to remark on it and my boss at the time (who was so much an apple fanboy that he honestly felt that the majority of his customers were using netscape on a mac in 2001) grudgingly agreed with me.

Just so you know, the GUI didn’t spring fully formed from the brow of Steve Jobs…

>BTW, an interesting counterpoint to this. the change from OS9 to OSX made Mac OS look and feel so much like Windows NT that i felt cause to remark on it

The implication that OS X copied the Windows GUI isn’t quite fair either. The actual history is that the OS X GUI was descended from the GUI layer on the NeXT series of Unix workstations, though it was given a makeover to make it have more of an OS9-like look and feel. The result was that it re-converged in many ways with the NT GUI, which was partly an imitation of OS9 but also has elements traceable back to Unix GUIs of the 1980s and early 1990s.

>Android was started by guys who had done a lot of successful cellphone work (Danger Sidekick) to develop cellphone software in 2003:

Just to reinforce this point, I was pretty familiar with the Sidekick as it existed in 2002; some close friends of mine were early adopters. It was a really excellent design for its time, still in some ways unmatched by any modern smartphone. The feature set probably influenced modern smartphones as much as the iPhone, which launched five years later.

I think Android is best understood not as an imitation iPhone but as a successor to the Sidekick. The design group was mostly the same people, and the resemblance was immediately clear to me and my Sidekick-owning friends when the G-1 first shipped.

What i was trying to imply is that the history of GUI development has involved cross pollination from various sources, and no-one is innocent here. Mac OS has copied elements from windows, windows has copied elements from Mac OS. Trying to say that “Oh X is just a copy of Y” on any timeline greater than one version(for either product) is blinkered and disingenuous.

At the same time i’d like to point out that this is normal and any situation other than this would be both anti-competitive and against the consumers interest. It’s hard to provide a decent transition scheme if half the buttons have to do different things because USPTO has delusions of granduer.

>What i was trying to imply is that the history of GUI development has involved cross pollination from various sources, and no-one is innocent here. Mac OS has copied elements from windows, windows has copied elements from Mac OS. Trying to say that “Oh X is just a copy of Y” on any timeline greater than one version(for either product) is blinkered and disingenuous.

That is entirely correct. The widespread belief that the Mac GUI was a de novo invention of Apple and all modern GUIs are mere imitations of it is probably Apple marketing’s greatest achievement – and certainly its greatest lie.

Winter, I’m not going to provide links, but I don’t think I’m “projecting” when I refer to the many comments about how Apple is going to lose in smartphones, be swamped by Android, decline because of network effects, etc. Market share is one valid measure, but it’s a stretch to say that a company with increasing sales and more profits in a sector than any competitor (or even a number of competitors added together) is “losing” in any important way.

The first Android phones had physical keyboards and looked a lot like Blackberrys, which is why it’s not absurd to claim that Android copied the iPhone when (most) Android phones went to virtual keyboards.

Canon would love to have Apple’s mindshare and profit margins. A limited number of carefully designed models is a feature, not a bug. Conventional marketing department wisdom and internal company politics usually leads to a proliferation of barely-differentiated SKUs and lower profits.

And I still think it’s odd to say that Apple’s mountains of profit from iPhones and iOS makes them vulnerable in any meaningful way: wouldn’t that mean the far smaller profits of Android phone makers make them *less* vulnerable to competition? I don’t think business works that way.

>The first Android phones had physical keyboards and looked a lot like Blackberrys, which is why it’s not absurd to claim that Android copied the iPhone when (most) Android phones went to virtual keyboards.

Don’t confuse the OS with the hardware. The early Android phones had physical keyboards because they were intended to be a better, faster descendant of the Sidekick. The first Android phone, the G-1, also had a physical keyboard, and my G-2 (like many other Android handsets) still does. The move to soft keyboards probably was influenced by the iPhone, but that influence acted mainly on handset designers rather than Android.

Please try learning your history from somewhere other than Apple press releases.

I don’t think I’m “projecting” when I refer to the many comments about how Apple is going to lose in smartphones, be swamped by Android, decline because of network effects, etc.

A lot of people here don’t want Apple to own the space. Most of us don’t care if Apple profits handsomely from their piece of it.

Canon would love to have Apple’s mindshare and profit margins. A limited number of carefully designed models is a feature, not a bug. Conventional marketing department wisdom and internal company politics usually leads to a proliferation of barely-differentiated SKUs and lower profits.

How Apple decides to make a profit given its niche market is up to it, and so far it’s doing fine. Not my issue.

Market share is one valid measure, but it’s a stretch to say that a company with increasing sales and more profits in a sector than any competitor (or even a number of competitors added together) is “losing” in any important way.

C’mon. This is projecting. I know you hang around here a lot, and you’ve heard us say multiple times that we don’t mind if Apple gets rich off the snobs, but we want the average joe to have a choice. For this to happen, it is imperative that Android deny Apple majority market share, but we couldn’t care less how Apple fares in terms of profits. So, yes it is valid to claim that Apple is losing on the one metric we care about. Now, in addition to this, there is in fact some speculation about how Apple will handle losing market share — will it chase Android in a race to the bottom, will it continue to lead the way in innovation, etc. But I, for don’t really care about that, as long as Android wins marketshare.

The first Android phones had physical keyboards and looked a lot like Blackberrys, which is why it’s not absurd to claim that Android copied the iPhone when (most) Android phones went to virtual keyboards.

Look, it’s been obvious for at least two decades that the right way to do a phone would involve a touchscreen. It’s just been a matter of getting the quality up and the price down. I will be the first to admit that Apple has done a lot towards making this happen, but it wasn’t in a vacuum.

I walked into a Best Buy store the other day looking for an iPhone. All I could see were Android this, Android that. It looks to me like Apple isn’t getting its product out very well. Maybe they’re sticking too closely to the exclusivity = coolness idea. A marketing idea based on “game”? It’s looking like Apple has lost its superiority just by being absent from the places where everyone buys smartphones. I couldn’t believe in that whole Best Buy there wasn’t one iPhone I could pick up and look at. Maybe I just missed it. But I shouldn’t be able to.

“What I mean is that Android phones in aggregate are selling at about ten times the volume of the iPhone 4V.”

Ok, you are saying that the Verizon iPhone isn’t a game changer. Obviously, it’s not a game changer worldwide (which is what you are comparing it to with your 10:1 ratio). But what about the US? I want to see some solid #s on total smartphone breakout on Verizon post Verizon iPhone (Feb forward). All I’ve seen is 500K Thunderbolts since March 17 introduction and 2.2m iPhones from Feb 10 – March 31.

The first Android phones had physical keyboards and looked a lot like Blackberrys, which is why it’s not absurd to claim that Android copied the iPhone when (most) Android phones went to virtual keyboards.

Windows Mobile has had virtual keyboards for at least 2 or 3 different versions now. So if anything, you’d have to say that both iPhone and Android copied Microsoft (but then you can follow the chain back further, i’m pretty sure Palm Pilot had a virtual keyboard). As i said above, cross-pollination.

There’s a simple reason why Android mock-ups switched from a Blackberry to an iPhone. The Blackberry form factor was the one that had any form of runaway success until iPhone appeared. The iPhone’s basic form factor had been done several times (yes it was thicker) and had remained niche. As ESR says, don’t conflate hardware and software, the Android folks don’t give a rats ass about what hardware you put it on but they’d completely fail at marketing if they didn’t display concept art of Android running on the current breakaway leader’s form factor.

All I’ve seen is 500K Thunderbolts since March 17 introduction and 2.2m iPhones from Feb 10 – March 31.

Two comments have appeared around this kind of area.

1) Anecdotally, Thunderbolts are selling as well if not a little better than iPhone 4Vs. (Survey consisted of phoning Verizon stores across the US and asking what’s selling better)

* Even taking this anecdotal survey at face value it’s worth noting that this number is comparing new and shiny with a month old (potentially a year old because the iPhone 4V isn’t a tech upgrade on the iPhone 4). However iFans probably would be better off not pushing this angle. With yearly+ releases compared to a new android release every few weeks, Android is always going to be the new and shiny.

2) It’s possible we’ll get no better numbers than that. Verizon has historically been shy about saying how many Phones have been sold.

I walked into a Best Buy store the other day looking for an iPhone. All I could see were Android this, Android that. It looks to me like Apple isn’t getting its product out very well. Maybe they’re sticking too closely to the exclusivity = coolness idea. A marketing idea based on “game”? It’s looking like Apple has lost its superiority just by being absent from the places where everyone buys smartphones. I couldn’t believe in that whole Best Buy there wasn’t one iPhone I could pick up and look at. Maybe I just missed it. But I shouldn’t be able to.

Try an Apple Store. Apple opened those up to avoid being beholden to retailers who would undermine their sales efforts.

Anyway, Best Buy is pushing the iPad like crazy now: front and center with its own mini-display and everything, ready to be tried out by pretty Asian girls looking to exchange disposable income for yet another fashion accessory. The much-touted Xoom is stuck somewhere in the back amid last year’s netbooks.

No need. The Android vendors catalyzed by the open source groupthink, and CM hacker-festival antics have weighted the Android train beyond overload, assuring that the race to the bottom (where nobody makes money (other than Google)) has already pushed the Android train down the tracks beyond the point of safe descent.

I’m OK with an Android marketplace that comes to look like the PeeCee space of the late 90s, where nobody is making money (other than Intel), and, in-fact, Intel was paying handsomely for those ubiquitous “Intel inside” stickers.

Google paying for search engine bars, anyone? Bueller? (can you really not see where this has to end?)

China designing and building your cellphone infrastructure is a lot like China designing and building your airplane, isn’t it?

>> Are you denying that Android is an attempt to copy Iphone?
> Yes, because I’ve read what Andy Rubin had to say about the matter.

Gawd knows that Andy has no incentive to fabricate a new truth here.

> The style of design that led to both the iPhone and Android wasn’t invented by Apple, but rather traces back to the original early-1970s experiments in GUIs – the Alto and Dorado workstations and their kin at Xerox PARC.

Because they were direct-manipulation, touch-based interfaces, largely driven by gestures. (not)

> It’s a shame that you’re so ignorant of history as not to be aware of this, and it’s nothing that has to do with open vs. closed source; those early systems were closed-source too.

But not really by that much when you dive into the numbers. Especially considering they’ve been pushing it hard to stymie iPhone on Verizon (first, ridiculously low price for people still on iPhone 3 contract to upgrade to 4 for a contract extension, then ridiculously low price for old iPhone 3s). It was pretty common knowledge that iPhone was coming to Verizon before the first quarter, and officially announced early in the first quarter, so I think it’s pretty amazing that AT&T sold over 1.5 times the number of iPhones in Q1 as Verizon.

In my book, that goes to show that (a) price matters a lot to a lot of people, and (b) that AT&T gets this, and (c) that Verizon either doesn’t get it yet, or does get it, and doesn’t yet want it’s “superior” network overwhelmed with hordes of data-sucking hordes of iPhone-wielding college kids. Given Verizon’s pricing, institution of data caps, removal of every 2 year upgrade, etc., I would actually be inclined to place a small bet that Verizon knows exactly how price-sensitive its customers are, and is carefully managing bandwidth by how it sets pricing and contract terms. (In my opinion, Verizon was left with all the price-sensitive customers after all the big spenders decamped to AT&T a couple of years ago for the first iPhone.)

Likewise, I believe that AT&T is fully knowledgeable about its bandwidth vs. user satisfaction curve, and is showing itself to be pretty confident in the number of iPhones it dumped onto the market last quarter.

And now that AT&T doesn’t have a lock on iPhone, and feel they’ve got the bandwidth problem mostly under control for now, they’re pushing Android hard. I saw some fanboys discussing on Slashdot about how “if android is so good, why does AT&T have to give the handsets away for $0.01,” completely missing the point that AT&T can do that and still make more money on the handset over the life of the contract than on a $200 iPhone 4.

More interestingly, apparently some of those $0 refurbished iPhones only came with a 90 day warranty. When some of those suckers die 4 months into the 2 year contract, that’s a new Android user, you betcha.

> A limited number of carefully designed models is a feature, not a bug.

A limited number of carefully designed models is a feature for Apple, and a bug for many (but not all) consumers.

I’m one of those consumers. This applies to other items I want to buy, so much so that I am able to rule out entire company’s product lines, even though I truly believe they make wonderful, desirable products, because they don’t have a hardware feature I want. I want really high reliability, because I have experienced unreliability, and I want a magazine safety, because I never want to have the horrible thing happened to me that happened to some poor government employed schlub in front of a classroom, and which happens to so many other people but not quite so publically. I have made the same root mistake myself, but without a loud bang following. Lucky me. Training, practice and good rules can’t fix everything, although I also need more training and more practice.

oops, I mistyped JonB. I meant 260K Thunderbolt activations from March 17-March 31.

I didn’t even look at the numbers.
My point was that there has been a report of Thunderbolt outselling iPhone 4V in stores. The excess could probably be explained by preorders. (I think there was a comment from Patrick about that in one of these posts but buggered if i can find it)

That’s a reasonable number. I’ve been using 65%, which I’m sure is high, by dividing 3.6 m activations by 5.5 m sales, but I think I did see that maybe 300K units were hand-me-downs. Let’s go with that.

Basically, there is no doubt that the price drop on the iPhone reeled in the sales, but that’s probably only temporary.

Here’s a current estimate that there are 8 million blackberry users on AT&T. So, even if the blackberry is a smartphone by AT&T’s definition, then around 25% of AT&T’s smartphone customers are blackberries.

So, if we assume the blackberry number is static (which I doubt — I think it’s dropping), and assume regression to the mean, and also assume that there are no other viable contenders, then 15% of AT&T’s smartphone customers are probably on Android. That’s not at all bad when you consider how hard they’ve been pushing iPhone and how soft they’ve been pushing Android, and the fact that anybody that absolutely had to have an iPhone is already on AT&T.

Personally, I think that if you look at the trend (although I wish they didn’t switch reporting from “integrated devices” to “smartphones”), if AT&T hadn’t craftily started pumping out used phones last quarter, they would have sold a lot fewer iPhones (less than Verizon), and a lot more Android, but I have no way to prove that. But to me, the numbers say loud and clear that there is a huge market for a nice smartphone at a low price. We’ll see how things look next quarter.

You should take all my numbers with a grain of salt. But hopefully, they’re not as bad as these:

One thing I was wrong on. I had read a site that said that Thunderbolt and iPhone were released at the same time, and I repeated the mistake. But that just reinforces my point rather than detracts from it, I think.

Assuming it’s from the same “moving average” surveys as the rest of comscore’s public released data, it lags reality by a month or two, so the approximately 1 million AT&T smartphones shown in November reflect reality in mid-September. In any case, it hopefully lines up with this comscore report:

when Apple had 25% of the 61.5 million smartphone subscribers in the country. So, at that time, Android would have been only about one fifteenth the size of Apple at AT&T, possibly 3 or 4%. But if that data was really from around the middle of September, remember that AT&T activated 2.8 M non-iPhone “integrated devices” in the third quarter, and 3.3 M non-iPhone “integrated devices” in the fourth quarter. Also remember they were gearing up for Verizon, and a lot of the iPhone activations were low-cost upgrades for still-in-contract iPhone 3 users. They apparently then sold those iPhones in Q1.

You’re absolutely right that an Android/Blackberry/Other breakout would be good, but if we somewhat randomly assume that half the non iPhone integrated devices were Android, that would get us to 1 + (2.8 + 3.3)/2 = 3.75 M Android phones at the end of Q4, which would have been about 9% of their “integrated device” category, which was obviously much larger than their “smartphone” category.

In any case, fancy new blackberries notwithstanding, I think if they even bother to break out iPhones next quarter, we can assume that Android accounts for most of “other.”

There is no question that many users will prefer an iPhone at the same price as an Android today. But it is unlikely that iPhones will keep matching prices with Android. I have said this multiple times in multiple ways on multiple posts. Is it really that hard to understand that the market is price sensitive, and that’s one of the reasons that I think that Android will win?

Kind of sounds like the iPod Touch dismissal. Hmm, numbers that don’t support my conclusion? They must not count! Hmm, let me find a reason to exclude….

What the hell am I excluding??!? I’m simply declaring my opinion that, this quarter, absent unlikely huge price drops from the carriers, AT&T and Verizon will both struggle to sell as many iPhones as they did this quarter. Feel free to voice your opinion.

ZTE, the fourth-largest cellphone maker in the world is, like Nokia and others, struggling with dumbphones. But their Android business is growing, and is a bright spot for them. Last quarter, their profit was up 16%, to $19.4 million, on revenue of $2.2 billion.

This is why Android wins the price game. Apple will not stay in any kind of market where they are living on a 1% profit margin, and Apple is making so much money that people who want iPhones are a really juicy target for the ZTEs of the world, and they will do whatever it takes to make an iPhone substitute that is acceptable enough at a price that is good enough, so they can bump their 1% to 3%.

Even if Apple keeps pumping out all the iPhones they can make, there is still a whole world of 5 billion mobile subscribers out there, and it is the ZTEs of the world (and it should have been the Nokias, too) who are going to be selling most of those their first smartphone. This is how the smartphone market can come to look like the PC market. Apple can probably get most of the profit in the market by selling all the phones that cost > $500, at least for awhile. And if Apple is at all supply-constrained, it doesn’t make any sense for them to drop the price anyway.

One thing I was wrong on. I had read a site that said that Thunderbolt and iPhone were released at the same time, and I repeated the mistake. But that just reinforces my point rather than detracts from it, I think.

Apparantly the HTC Thunderbolt sold 400% of their previous pre-order record and was 25% of their business on the first day in and of itself. So i’m wondering if Verizon, when they say “we sold 260k in 2 weeks”, is including pre-orders from Wirefly.

But they don’t have any older 16 or 32 GB phones for sale any more right now. And, as I mentioned earlier, some buyers will probably get stuck with a 2 year contract with dataplan, with a phone that craps out after a few months:

I was at Best Buy recently and there was an almost Rockwellesque middle class family looking at replacement phones for the teen daughter (I think she had an “old” Android).

She was looking at the new iPhone, but it dad was looking more at the Samsung Fascinate, which was considerably cheaper. I was thinking to myself, iPhone is going to be so boutique very very soon indeed.

AT&T Inc. said Monday that if its deal to buy T-Mobile USA goes through, T-Mobile subscribers with “3G” phones will need to replace those to keep their wireless broadband service working. But there will be plenty of time to do that.

Dallas-based AT&T said Sunday it had agreed to buy T-Mobile USA for $39 billion. If approved by regulators, the deal would close in about a year.

AT&T said that some time after the closing, it plans to rearrange how T-Mobile’s cell towers work. The airwaves they use for third-generation services, or 3G, will be repurposed for 4G, which is faster.

That would leave current T-Mobile phones without 3G. They would need to be replaced with phones that use AT&T’s 3G frequencies. Ralph de la Vega, AT&T’s head of wireless and consumer services, said this will happen as part of the normal phone upgrade process.

“There’s nothing for them to worry about … it will be done over time, in a way that’s good for customers and good for AT&T,” de la Vega said in an interview.

Essentially, T-Mobile’s network will be put in maintenance mode, with any new customers receiving phones on AT&T’s frequencies, until the transition is complete and AT&T can shut down the T-Mobile network.

To be sure, it’s about more than spectrum. T-Mobile owns a lot of towers. Putting AT&T-frequency radios on previously-T-Mobile towers is a relatively low-cost possibility that would help with AT&T reception/bandwidth, although that will probably have to wait at least a year or so until the back-end routing systems are merged. (The regulatory hurdles to add radios to existing towers is orders of magnitude lower than building new towers.)

Google is going to lose, massively. In T-Mobile, it has a great partner for Android OS-based devices. Now Google will be beholden to two massive phone companies — Verizon and AT&T — who will doubtless attempt to hijack Android to serve their own ends. The G1, Nexus One and G2 have all been T-Mobile phones (Google did produce an AT&T variant of the N1, but it ended up giving many (if not most) of them away to developers.) Now, who is going to launch Google’s preferred phones? (Sprint? Don’t make me laugh.)

The announcement of the deal has already started to change the US market. Before the merger was announced, the Android handset makers such as HTC and Motorola had two major carriers who could buy their GSM-based phones. They just lost any ability to control or even influence price and profits on handsets because now there is a single buyer that can dictate what GSM phones come to market in the US. Even with LTE becoming the standard, it would essentially be a market dominated by two buyers. What if AT&T and Verizon don’t *want* $85 Android phones? They might be all over China, and Europe, but good luck getting them to work in the US. SIM lock, anyone?

>The phone part will work, but your 3G data… gone in less than two years.

But AT&T says “several years”. No matter. Even if it’s just two years, SoC-based Androids will be so cheap by then that replacing those 3G phones won’t be a big deal. I’d want to have LTE capability by then, anyway.

>What if AT&T and Verizon don’t *want* $85 Android phones?

They’d be crazy not to, because cheaper smartphones means more people signing up for data plans. As a general rule, you maximize your own profits by commoditizing everyone else in the value chain. Empirically, AT&T has not been displaying any perverse desire to keep smartphone prices high – look what they’ve been doing with iPhone refurbs.

There are plenty of providers who would love to provide the other 5 billion customers with a connection. Except that AT&T and Verizon only service 300M customers max. So the rest of humanity will not use them whatever they do.

Apple’s quarter beat records as usual, but did not convince that the firm is more than a one-trick pony in mobile.

All this could leave Apple in a weakened position, especially if it does not move more aggressively to embrace the cloud/browser trend, which may eventually start to eclipse the apps business where it succeeds so well. Apple has made only halfhearted moves in this direction, and has been outsmarted by firms like Amazon so far. We remain unconvinced of the chances for the new breed of cloud-focused operating systems – webOS, Chrome OS, Microsoft Jupiter and MeeGo – but they do indicate where the tide of mobile web behavior is flowing, and Apple is notably absent.

She was looking at the new iPhone, but dad was looking more at the Samsung Fascinate, which was considerably cheaper. I was thinking to myself, iPhone is going to be so boutique very very soon indeed.

Four differences between teenage daughter and dad:

Dad is paying for the phone.
Dad is actually calculating the true price of the phone, plus two replacements for when his daughter loses it.
Dad is thinking about where the money to pay for the daughter’s college education is going to come from.
Dad really believes not having all the stuff the cool kids do “builds character.”

Apple’s not the only company to have niche market collapse, but Apple’s specific previous niche market collapses include its LaserWriter line of printers, the Newton PDAs, plus a couple of near-misses in the markets for the Mac.

>Look, it’s been obvious for at least two decades that the right way to do a phone would involve a touchscreen. It’s just been a matter of getting the quality up and the price down.

This is so silly you deserve some kind of prize for ‘most revisionistic comment on the entire internet’. There needs to be a shrine to this comment. In the meantime I suggest you jog your memory by looking at this. Before the iPhone there had been only one smartphone with a touchscreen (the LG KE850). It’s not just that there were touchscreen phones that didn’t catch on, or there were failed experiments. Apart from that one LG phone, every single smartphone prior to 2007 from every carrier looked the same—a tiny screen with either a big qwerty keyboard or a tiny alphanumeric one. That’s exactly what Google had planned before the iPhone was annouced, too.

Secondly, it’s not as though everyone was unsurprised by the touchscreen when the iPhone was annouced. Ballmer said a touchscreen phone could not succeed in business. Walt Mossberg said he wasn’t sure a touchscreen-only device could catch on. Nokia CEO Olli-Pekka Kallasvuo was impressed, but admitted the iPhone had been a ‘wake up call’ (i.e. they were surprised).

If it had been ‘obvious for two decades that the right way to do a phone would involve a touchscreen’ then where why the derision, why the naysaying, why the surprise?

And when the iPhone was released, suddenly every major phone manufacturer completely dumped their product roadmap and set to work making touchscreen phones. If they were capable of doing this all along, why didn’t they? According to you, this was ‘obviously’ the right way to make a phone.

‘It’s just been a matter of getting the quality up and the price down’ can be said of every breakthrough in engineering or science ever. It was obvious that the right way to improve on horse-drawn cart was through machinery, we just had to get the quality up and the price down. It was obvious that the right way to do pharmacology would be to have pills that actually cure diseases rather than selling home remedies and snake oil, but we just had to get the quality of anatomy, chemistry and basic biology up and the price down. It was obvious we would set foot on the moon sometime, we just had to get the quality of rocket propulsion, robotics and computers up and the price down. In fact, this is also a good explanation of why we don’t have matter transporters, warp drives, artificial brains, matter replicators, and any other pie-in-the-sky science fiction device you can think of. We can all live happy lives without doing any work and we need never die, it’s just a matter of getting the quality up and the price down. You goose.

Look, it’s been obvious for at least two decades that the right way to do a phone would involve a touchscreen.

This is so silly you deserve some kind of prize for ‘most revisionistic comment on the entire internet’.

In your unstudied opinion. I was working with touchscreens for learning on desktops with computers and laser discs in 1987. And I was late to the party. According to wikipedia, “In 1986 Mosher used the Atari ST and bundled NeoChrome paint to create and market the first graphical touchscreen POS software.”

At that time, it was clear to me and my coworkers that, if you could afford the components, it was the most awesome way to code an interface ever, and since then several industrial designs have used touchscreens.

Basically, any space-constrained, modal interface, which needs a high display density ability for its size can benefit from a touch screen. Sound familiar?

The rest of your comment is as silly as you seem to think mine is. You treat cellphones as if they are some unique technology that requires completely separate laws of physics and chemistry from all other man-made artifacts. How stupid is that?

@patrick maupin “But they don’t have any older 16 or 32 GB phones for sale any more right now. And, as I mentioned earlier, some buyers will probably get stuck with a 2 year contract with dataplan, with a phone that craps out after a few months:”

As soon as the iPhone 4 came out, the 3GS was sold as a new 8GB model. The only 16/32 GB models remaining came from stock from before iPhone 4.

I don’t have any #s, but new product usually greatly outsells refurbs. And I will point out that these phones have no moving parts. The most likely failure of a phone is user caused damage (dropping, water). Seems like a very minor issue/point to me.

Send a text message with your touchscreen phone without looking at the display.

It’s easy with a numeric-keypad phone, might be possible with a QWERTY phone. Touchscreens aren’t there yet. There’s a lot to be said for the haptic feedback of real physical clickable keys.

Not to dismiss touchscreens, as they have proven useful. But I think that for example the Acer ICONIA laptops (which dispense outright with physical keyboards, replacing them with an expensive second touchscreen) will be nothing more than intriguing toys for the rich. Not quite as capable for everyday work as regular laptops, not as cost-effective as tablets.

Send a text message with your touchscreen phone without looking at the display.

It’s easy with a numeric-keypad phone, might be possible with a QWERTY phone. Touchscreens aren’t there yet. There’s a lot to be said for the haptic feedback of real physical clickable keys.

So, if the success of the iPhone did make anything obvious to the average pundit that they couldn’t figure out before, it is this: if you make a tiny, general-purpose computing device, with as much interface and connectivity as you can cram into a pocketable form factor, compromises on normal phone usage are OK.

>At that time, it was clear to me and my coworkers that, if you could afford the components, it was the most awesome way to code an interface ever, and since then several industrial designs have used touchscreens.

Either you don’t understand why touchscreens are popular on phones, or you are just dissembling here. Touch screens underwent a flush of popularity in the late 80s and 90s, along with light pens and trackballs and ‘virtual reality’, and were widely cast off as useless except in certain niche applications (POS kiosks, for example). Eric has put it down to the ‘gorilla arm’ phenomenon, which at least explains why they never caught on in the desktop. You’re doing two simultaneous handwaves here: you’re pretending that once you have a hardware touchscreen it’s straightforward to make a useful touch interface, and you’re pretending that price is the only factor that has prevented touch from proliferating in every modal, space-constrained application. Both points are obviously false.

The original iphone used off-the-shelf components, so it’s not as though it was a quantum leap in hardware engineering. The breakthrough is on the software side. If you look at the various mockups people had made when rumors of an all-touch apple phone were circulating, people literally could not imagine what a successful touch-only interface would look like on a screen that small. Hell, just look at the LG ‘Prada’ phone! If it was as simple to figure out as you are pretending, someone else would have done it first, since — as you point out — the hardware was already there for the taking since the mid-90s.

The rudimentary touchscreen learning software and POS kiosks of the 80s are completely unrelated to modern touchscreen phones in terms of interface software. They are in different phyla.

I don’t have any #s, but new product usually greatly outsells refurbs.

Agreed. Usually. But I think AT&T had a huge stock of refurb due to its iPhone 4 upgrade policy last fall. In any case, what matters is if they are able and willing to keep selling some iPhones at a cheap enough price point that at least some customers prefer it to the lower cost Androids. $200 phones under contract won’t sell nearly as many as $50 phones.

And I will point out that these phones have no moving parts. The most likely failure of a phone is user caused damage (dropping, water). Seems like a very minor issue/point to me.

Then perhaps you should start offering warranties in competition with these guys, since your data shows you can undercut substantially them and still make a handsome profit.

> you’re pretending that once you have a hardware touchscreen it’s straightforward to make a useful touch interface

That’s part of the evolutionary software interface growth that Eric was trying to explain to DarrenCardinal.

> and you’re pretending that price is the only factor that has prevented touch from proliferating in every modal, space-constrained application.

A combination of price and quality, which at the margin, can be reduced to price, yes. A few years ago, an iPhone-quality touchscreen of that size would have set you back $300 – $400 for the touch portion alone, never mind the screen.

> The original iphone used off-the-shelf components, so it’s not as though it was a quantum leap in hardware engineering.

Thus completely contradicting your snide original post that explained that it was all brand new rocket science.

> The breakthrough is on the software side.

No, the software is not rocket science, either. Anything that could possibly be called a breakthrough, although I still just think it’s evolutionary, is on the user-interface side.

> If it was as simple to figure out as you are pretending, someone else would have done it first, since — as you point out — the hardware was already there for the taking since the mid-90s.

There are lots of examples of touch screen phones predating the iPhone. For example, the IBM Simon.

For an inflection point like this to happen takes a large number of factors. A good argument can be made that Apple only succeeded precisely because they weren’t a cellphone company, and they built a device that could be a primary phone, while at the same time its phone function was secondary to its other features — as Jeff Read points out, there are real problems with the interface for blind calling and texting, things which people had previously taken for granted, that are forgivable in a multifunction device.

> people literally could not imagine what a successful touch-only interface would look like on a screen that small.

This is absolutely untrue. There already were successful touch-only interfaces on screens that small — just not on phones. The printer I use at work, for example.

Winter, Apple has always been a beleaguered company. I don’t think there has ever been a year when some link baiting fool has predicted the imminent demise of Apple. When Apple actually shows signs of approaching anything like the 90’s and you might be on to something, until then anyone assuming Apple has run out of tricks is just shooting in the dark, hoping this year is the year they get lucky.

>But I think AT&T had a huge stock of refurb due to its iPhone 4 upgrade policy last fall.

I don’t know specifically about where AT&T’s stock came from but Apple has always maintained some constant level of production / stock of older model phones. You could today walk into an Apple store with a broken 1st gen, pay for an OOW repair and walk out with a refurb 1st gen. If the cheap previous model phones are working for Apple, I imagine they will have no trouble keeping them coming.

>Then perhaps you should start offering warranties in competition with these guys,
>since your data shows you can undercut substantially them and still make a handsome profit.

For all the snark, your own link supports phil’s point. Of the failures, a full 70% of them are accidental damage and not covered by warranty anyway.

@tmoney
“Apple actually shows signs of approaching anything like the 90?s and you might be on to something, until then anyone assuming Apple has run out of tricks is just shooting in the dark, hoping this year is the year they get lucky.”

Oh, I think Apple will find something revolutionary new to open up a new market. That is the safe bet given history. But in the smartphone business, the writing is on the wall. Apple will still earn a bundle, but they are not leading the pack anymore.

Personally, I think that tech companies must be chased relentlessly into making cheaper, better, or innovative products. Any tech company that stands still is not doing it’s part and should be taken over or liquidated. High on the list is the NoWin alliance.

Before the iPhone there had been only one smartphone with a touchscreen (the LG KE850). It’s not just that there were touchscreen phones that didn’t catch on, or there were failed experiments. Apart from that one LG phone, every single smartphone prior to 2007 from every carrier looked the same—a tiny screen with either a big qwerty keyboard or a tiny alphanumeric one.

Handspring would like a word with you. For that matter, until I traded up to my Pre, I used my Treo 650 for nearly four years. The screen wasn’t exactly “tiny”, and the physical keyboard was one of the specific reasons I purchased another Palm.

> For all the snark, your own link supports phil’s point. Of the failures, a full 70% of them are accidental damage and not covered by warranty anyway.

My original point, which stands, was that somebody who can’t afford the $200 iPhone, but buys an older one for $0 or $50, is going to be in a world of hurt when the thing stops working: “some buyers will probably get stuck with a 2 year contract with dataplan, with a phone that craps out after a few months.”

Even if AT&T only sold a million refurbs (and looking at AT&T’s 3.6 million vs Verizon’s 2.2 million, I could easily believe it was higher than that), then perhaps 75 thousand people are going to be hit by the warranty issue. And yes, another 181 thousand people are going to have issues that wouldn’t have been covered under warranty anyway, but that just reinforces my point — 256K refurbished iPhone users are suddenly going to need a new phone at some point over the life of the contract, and I think that’s a win for Android.

And, on an individual level, if you happened to be one of those 75K people with no cash and no working iPhone and a large monthly cellphone bill, and you had been extra careful with the phone because you couldn’t afford to break it, but didn’t understand the fine print that it might not last as long as the plan then I’m sure you would disagree vehemently with Phil’s assertion that it “Seems like a very minor issue/point to me.”

>But in the smartphone business, the writing is on the wall. Apple will still earn a bundle, but they are
>not leading the pack anymore.

To be honest, my dark secret as an Apple fan has always been a small hope that they forever remain a niche player. Big enough to attract sufficient software / developer interest, but small enough that they can continue to experiment, innovate and yes, even drag people kicking and screaming into the future.

I’ve always thought one of the worst things Microsoft had going for them was their slavish devotion to backwards compatibility. They had to be though, since they were the biggest and the one everyone relied on. Assume for a moment, history had gone the other way, and class Mac OS 9 was the leader of the pack in 1999. Does anyone think for a moment Apple would have been able to pull off the transition they made from classic to OS X in the same time frame if they had been the leader? Or the 1998 decision to go 100% pure USB / Firewire and no legacy ports at all?

As an Apple shareholder, I’m always happy when they’re selling more and on top. As a customer, I prefer when they have the freedom to experiment.

>My original point, which stands, was that somebody who can’t afford the $200 iPhone, but buys an older
>one for $0 or $50, is going to be in a world of hurt when the thing stops working: “some buyers will
>probably get stuck with a 2 year contract with dataplan, with a phone that craps out after a few months.”

For the time being, they’re still in a world of hurt as all the decent android phones are still $150 + without contract. We’re talking about a subset of customers who bought a refurb iPhone that died within a brief 8 month window for non accidental reasons for us to be talking about anyone that would have gotten something out of buying an android phone. And per your data that’s ~2.5% of phones.

Helsingin Sanomat (the biggest newspaper in Finland) reports that Nokia will initiate the layoff procedures for a large number of people tomorrow (Wed 27 April). And large is not an understatement, they’ve reserved a major sports arena in at least one location for the meeting to inform the employees. Nokia is apparently ready to transfer some of its patents to start-ups or universities to foster the further development of the ideas and the creation of jobs.

We’re talking about a subset of customers who bought a refurb iPhone that died within a brief 8 month window for non accidental reasons for us to be talking about anyone that would have gotten something out of buying an android phone. And per your data that’s ~2.5% of phones.

I don’t know what you mean. Where does 8 months come from? And why “non-accidental?” And how do you get to 2.5%?

Any dumbphone customer who got lured into signing a 2 year more costly contract because they got a refurbished iPhone cheap is at risk for having the phone crap out on them. Destruction rate is apparently approximately 9% per year, and failure rate is approximately 3.75% per year. Once the phone ceases to function, they have 4 choices:

– Buy out the contract
– Keep paying but don’t use it
– Keep paying, use with an old phone
– Buy a replacement phone

This is presumably about the same for any iPhone user; the only difference is that the ones who bought for $50 are presumably a lot more price-sensitive.

For the time being, they’re still in a world of hurt as all the decent android phones are still $150 + without contract.

> I’ve always thought one of the worst things Microsoft had going for them was their slavish devotion to backwards compatibility.

To my mind, useful backward-compatibility is one of the biggest wins for open source — since either the OS or the app can be modified and recompiled as necessary, it mostly happens in a way that is relatively painless most of the time. And hardware peripherals back to the ASR-33 are still supported.

> Touchscreens aren’t there yet. There’s a lot to be said for the haptic feedback of real physical clickable keys.

Forgot to mention, but obviously, haptics on touchscreens is another evolutionary step that’s coming along as well. Personally, I think it’s a given it’s going to happen in a big way when the right capabilities come together and volume manufacturers (yes like Apple) manage to drive the price down. In other words, I think it’s “obvious.” But if, for example, the iPhone 5 has haptics, Bennett will probably argue it was all Apple’s brilliance, conveniently ignoring the fact that Samsung had a haptic touchscreen cellphone in 2008.

The ASR-33 is still supported but a game built for a 2000 version of Linux doesn’t work with the libstdc++ shipped with your most recent Fedora/Ubuntu distribution. Hence today’s circumstance in which people simply don’t make games for Linux.

Quite some time ago Shenpen elucidated the single solitary criterion that drives OS adoption: the OS vendor must guaran-fucking-tee that software written for today’s version of the OS will run — bit-identical — on any future version of the OS. In the enterprise this is the first, last, and only thing as it means that the seven-figure-priced ERP system you purchase becomes a lifetime investment rather than a “till it gets obsolesced whenever” investment. The only OS that comes anywhere near that ideal in the PC realm is Windows. The only platform I can think of that actually achieves this ideal is the IBM System/360, which is why it’s the platform that, in IBM’s own words, “runs Western civilization”.

Linux fails on this front. Hard. Constantly changing standard libs, compilers (and hence compiler semantics) and kernel-userland interfaces mean that there’s nothing in Linux (except for maybe POSIX) that application developers can rely on to be there forever. Which is great if you’re Google, everything lives in Perforce, and you’ve got scads of engineers on hand to maintain and evolve your app as your platforms evolve.

Sucks if you’re General Electric and you don’t even have source let alone source control, and the last guy with the wizarding skills to live-patch the payroll app retired a few years ago. What happens if a kernel or standard library call changes? It’d be the end of your business.

> In the enterprise this is the first, last, and only thing as it means that the seven-figure-priced ERP system you purchase becomes a lifetime investment rather than a “till it gets obsolesced whenever” investment.

We have several 7 figure engineering tools. None of them run on windows.

> Linux fails on this front. Hard.

Disagree. Red hat does an excellent job of maintaining old versions, which a lot of legacy tools are running on. VMs mean that, in the future, it won’t matter nearly so much. We’re no different than any other chip company. Microsoft “value added” partners might be able to snow the finance side with their story, but it doesn’t work where real work gets done.

Quite frankly, I find your attitude to be annoying and downright stupid.

How hard can it be to understand the following simple sentence:

THE USER DOESN’T CARE.

Pushing the blame around doesn’t help anybody. The only thing that helps is
Fedora being helpful, not being obstinate.

Also, the fact is, that from a Q&A standpoint, a memcpy() that “just does the
right thing” is simply _better_. Quoting standards is just stupid, when there’s
two simple choices: “it works” or “it doesn’t work because bugs happen”.

Standards are paper. I use paper to wipe my butt every day. That’s how much
that paper is worth.

Reality is what matters. When glibc changed memcpy, it created problems. Saying
“not my problem” is irresponsible when it hurts users.

And pointing fingers at Adobe and blaming them for creating bad software is
_doubly_ irresponsible if you are then not willing to set a higher standard for
your own project. And “not my problem” is not a higher standard.

So please just fix it.

The easy and technically nice solution is to just say “we’ll alias memcpy to
memmove – good software should never notice, and it helps bad software and a
known problem”.

Android’s US trailing-6-month acquisition rate is 50% of all smartphones, bringing it to 37% of installed base.

Apples’s was only 25%, 2% less than its installed base of 27%. Of course, this includes the period before the AT&T exclusive ended, but judging by 2.2M verizon iPhones last quarter, Verizon will only give a temporary reprieve from the inexorable trend. But Apple’s doing better than Blackberry, which had 22% of installed base, but only 15% of sales in the last 6 months.

I was thinking about any useful data that might come from trying to correlate the new 6 month Neilsen report against the March Kantar report discussed earlier.

I noticed one thing in the Kantar report that I didn’t fully analyze before, that I found intriguing. They claim that, in the US, 3.62 M iPhones were sold in March. If we take activations as proxies for sales, and we know that there were 2.2M + 3.6M = 5.8M activations for the quarter, it gives us the intriguing statistic that 62% of all iPhones sold in the quarter were sold in March.

This indicates an iPhone adoption acceleration that is hard to square with other data points (for example, iPhone v. Thunderbolt sales, reports of well over a million Verizon iPhones in February, etc.).

If all these seemingly conflicting data points are, in fact, accurate, the only explanation I can think right now of is that, perhaps a lot of AT&T customers really were considering switching to iPhones from Verizon, then waited to see the market reaction, found out that the speed wasn’t all that great, you couldn’t talk and data at the same time, Verizon instituted data caps and similar plan stupidities, etc., and (perhaps partly enticed by AT&T’s old model sale prices) decided to go ahead and buy an iPhone from AT&T.

Heh. In this case, I would bet at least 3.5 out of 4 (I think they mentioned being purchasers of phone insurance.) But the daughter’s Android has been mysteriously “freezing” (heh), which may among the cool kids amount to “Waaah! I want an upgrade!” ;)

> Any dumbphone customer who got lured into signing a 2 year more costly contract because they got a refurbished iPhone cheap is at risk for having the phone crap out on them. Destruction rate is apparently approximately 9% per year, and failure rate is approximately 3.75% per year. Once the phone ceases to function, they have 4 choices:

There is a fifth choice: Pay whatever monthly hardware insurance the operator provides. For my mobile operator (Sprint) this even covers when I forget to take it out of my pocket when I go swimming.

I learned to pay for this when my used HTC Touch died before the new phone I wanted was available and I had to fall back to an old feature phone.

This is the difference between ‘Enterprise’ software and non-‘Enterprise’ software. Enterprise software isn’t necessarily any better (it’s probably actually worse) than non-Enterprise software (completely ignoring Free/non-Free). However, ‘Enterprise’ software is supposed to work all the time, with every assumption of the product you’ve ever made supported, unless the difference was explicitly called out in advance of you installing it. If something changes like that, it’s a product defect, even if the product now does what it claimed it was going to do before but failed to do so because of an implementation error.

True. And as you say, you learned about this capability after you needed it, and you’re quite possibly better informed than the average refurbished iPhone buyer who is a first-time smartphone user. So, I imagine that’s not really an after-the-event choice for a lot of people.

>I don’t know what you mean. Where does 8 months come from? And why “non-accidental?” And how do you get to 2.5%?

Sorry, I was posting in a hurry and wasn’t very clear. First, it really should have been 9 months. This comes from the 90 day warranty up front, and then the fact that no matter if you buy new android, refurb android, new iPhone or refurb iPhone, if your phone dies after 1 year, you’re out of warranty, unless you paid for an extended warranty (which I note that Apple sells for refurb iPhones). Once you’re out of warranty, you’re paying full price or at least a large portion until your contract expires no matter which phone you bought, or you’re paying for a repair.

Non accidental because no matter what phone you buy, dropping it in a lake or running it over with your car is not covered, and you will be paying full price or for a repair again. The 2.5% came from the data you posted, assuming that the graph given was a cumulative failure rate, where the malfunction rate at 12 months is ~2.5%.

So like I said, the risk period where buying an android phone vs a refurb iPhone is very small and with a very small chance of failure. Now, this is true for the current state of things and has plenty of potential to change.

>There is a fifth choice: Pay whatever monthly hardware insurance the operator provides. For my mobile operator (Sprint) this even covers
>when I forget to take it out of my pocket when I go swimming.

OK, I see what you’re saying now. But in terms of the point I was trying to make, we’re still missing the forest for the trees. Let me try again, without using any numbers.

AT&T sold a hell of a lot of iPhones last quarter. I was originally presuming this was mostly due to the cheap refurbished/older phones, but after reviewing the Kantar report again, I think some of the volume might be explained by people who were planning on switching to Verizon for its iPhone, but later changed their minds.

In any case, to whatever extent AT&T managed to sell refurbished/old stock iPhones to people who otherwise wouldn’t have gotten an iPhone, or maybe even an Android, e.g. to the extent that a cheap iPhone became an “attractive nuisance,” there are now people carrying an iPhone who might not have otherwise even considered an Android and who quite possibly won’t be able to replace it with a new iPhone if something does goes wrong.

In the event that something does go wrong (which could be 6 months or a year from now), they will have a premium voice+data plan they have to keep paying for. If they really want to keep using a similar set of features, a lot of them will wind up switching to Android, as the only option that gives the functionality they need within their budget.

I don’t disagree that people who buy an Android phone up front will have similar issues with droppage, going swimming, etc. and I agree that this sort of user error (usually sans insurance) will also be a problem for more people than the lack of warranty on a refurbished iPhone (as will a typical 1 year warranty).

But the real crux is the sum of the out-of-warranty PLUS the user damage statistics. 26% in two years is huge, and I still think, to the extent that AT&T managed to entice dumbphone holdouts to smartphones by waving a free iPhone in front of them, at the end of the day, there will be a lot of people either going back to dumbphones, or going what they will perceive to be “halfway back” — e.g. to Android, once their phone stops functioning.

Conversely, to your point that the major risks inherent in owning any handset are probably relatively OS-agnostic, I don’t think that most people who decided they needed a smartphone, but for budgetary reasons it had to be an Android, are going to trade up to an iPhone if their phone dies. They are going to bite the bullet, eat beans for a few weeks, and buy another Android.

All this changes, of course, if Apple decides they need the volume play badly and start a brutal price war, but the way things stand, I think that AT&T growing the smartphone market last quarter by handing out “free” iPhones will be a boon to Android adoption.

> And as you say, you learned about this capability after you needed it, and you’re quite possibly better informed than the average refurbished iPhone buyer who is a first-time smartphone user.

Almost. I learned it was a good idea after I needed it. I knew could buy it and never had before, because I was cheap and the phone was used. A good salesperson could help with this, although I’ve never had that good a salesperson before. This does not invalidate your point, however:

If you are reading this thread and are considering buying a smartphone under contract with a relatively expensive plan, consider buying the insurance.

@Bennett
There needs to be a shrine to this comment. In the meantime I suggest you jog your memory by looking at this. Before the iPhone there had been only one smartphone with a touchscreen (the LG KE850). It’s not just that there were touchscreen phones that didn’t catch on, or there were failed experiments.

I think you just beat all previous contenders by wide margin. For example 2002 year phone by HTC. Or June 2007 model. Take a look on this demo which showcases it. It was published on YouTube the same month iPhone started selling – and it’s not some kind of “concept”. It’s a promo for the phone which went on sale the very some month.

And guess what: HTC was the company which was involved in the Android for a long, long time. It was the company which produced both G1 and N1. So no, touchscreen was brought to Android not by Apple – the UI was in development for years when iPhone went on sale.

@Bennett
If you look at the various mockups people had made when rumors of an all-touch apple phone were circulating, people literally could not imagine what a successful touch-only interface would look like on a screen that small.

Sorry, but TouchFLO was not a mockup. TouchFLO phones quite literally went on sale the same month iPhone went on sale. And they were done by the company which created the first Android phone. That’s true that Android team in Google was not so sure they even need a touchscreen (first developer models had no touchscreen, just a full QWERTY keyboard – and even first released version of Android was unusable on the phone without physical keyboard). But HTC… HTC was firmly convinced it’s essential and stylus must go. They worked for years polishing stylus-less touchscreen on phone by that time!

Apple did a lot of work popularizing touchscreen interface, but to say that “before the iPhone there had been only one smartphone with a touchscreen” it sure to contend for the prize “most revisionistic comment on the entire internet”…

@Patrick Maupin
Thus completely contradicting your snide original post that explained that it was all brand new rocket science.

Well it kinda was. The same as with iPad: it contains one truly high-end component – but it was chosen quite carefully. iPhone had capacitive touchscreen with multitouch. iPad has IPS.

Apple is very good presenting new things which come on schedule as some kind of “Apple-exclusive breakthrough”. Last year we’ve got “retina display” (which is born not because such a high DPI actually makes sense, but because it simplifies scaling), I think in a few years we’ll see something similar with iPad. I think Samsung is trying to prevent such shows – but I doubt it’ll succeed: there are a lot of things going on every year, Apple is very good picking different breakthroughs to use as Apple-only features. They will increase the resolution, but they will promote something entirely different as breakthrough. Apple rarely invents things, but they sure know how to choose and promote inventions made by others as their own.

Maybe I’m just missing something but I still don’t see how someone who bought a refurb iPhone because it was $50 turns into an android user if they break that phone. Replacing that $50 iPhone with an android phone will cost them roughly the same as replacing that iPhone with another iPhone. There is as we noted, an 9 month window in which yes, had they bought a new Android at the same $50 with contract that they bought the refurb iPhone for, they would have been better off, but like I said, that’s seems like it would be such a small number of people that it effects to not really count for much.

Thus completely contradicting your snide original post that explained that it was all brand new rocket science.

Well it kinda was. The same as with iPad: it contains one truly high-end component – but it was chosen quite carefully. iPhone had capacitive touchscreen with multitouch. iPad has IPS.

Well, first Bennett said that it was all completely new and magical, and I said that the magic had been done before but not at a low enough price point/high enough quality point. Then he backed up and said all the magic was in the software and that hadn’t been done before on any planet in the known universe. Now you’re saying that multitouch is magical. I still say it’s a quality/price point thing — multitouch was working in the early 80s.

Not that I’m knocking the ability to bring it all together and make it work. That’s worth a lot, and Apple’s been handsomely rewarded for its efforts. As I said, if Apple did bring any real new insight to the party, it was just that, on the road to a fully functional haptic pocket do-everything gadget, leaving out the haptics to start with wasn’t a bad compromise.

>I don’t think that’s going to be true now, and I certainly don’t think it will be true in 6 months.

Oh, hell no. Earlier today I was in NYC to be a speaker at the second Tribeca Disruptive Innovation awards. While there, I had a fascinating conversation with a Chinese-American angel investor who follows this blog. I won’t reveal his name, because he’s working on some mobile-related projects that are in deep stealth mode. But he did have this to say…

My prediction that somebody in China is planning a huge play in dirt-cheap Android SoC phones for Third World markets is correct. But, to his knowledge, Huawei and Lenovo and the suspects I had in mind aren’t the ones behind it. Rather, a startup (which he didn’t name) is tooling up to ship this fall. Unspoken but clear from what he carefully didn’t say is that there is serious VC or possibly Chinese government funding of the effort.

Given that there is probably some looseness in these numbers and the methodologies are probably a bit different and we should take all this with a grain of salt, to the extent both reports are accurate:

– Windows actually gained 2.3 points in installed base, on a sub-installed base rate sale of new phones in March. (I told you we should take this with a grain of salt.)

– Palm’s installed base stayed steady, with a slight decline in new sales from installed base.

– Apple gained 1.8 points of installed base to 27 percent, on slightly sub-installed base rate March sales of 25%. (Which might be consistent with lots of AT&T sales in January and lots of Verizon sales in February, but seems inconsistent with the Kantar report.)

– Android gained 4 points, from 33 to 37, on March sales of 50%.

– RIM took it in the shorts, losing 7 points of installed base, from 29 to 22, on March sales at 15%, or slightly more than half the initial installed base rate. I’m pretty sure this loss rate means people are throwing these things away.

So, basically, Apple’s sales in March were 50% of Android, Apple’s installed base growth of 1.8% was slightly less than Android’s installed base growth of 4%, and Android’s installed US base is now 37% higher than Apple’s (37%/27%).

Something certainly helped out Apple’s gains vs Android. As speculated by Richard Thompson in a comment on a previous post, (at least in the US) Android’s growth apparently slowed from 7% per quarter to 4% per quarter, while Apple went from 0.2% growth to 1.8% growth.

It appears that RIM is toast, and that if the carriers keep selling Apple aggressively, it will only take another 2 quarters before Apple and Google consume the carcass down to the unyielding gristle, and then start munching on each other.

The quick demise of RIM brings one other thought to mind: a lot more corporate IT departments currently support iOS (security model) than support Android. Perhaps the installed base of RIM is down to the nub of must-have corporate types, and only Apple is picking up any share from ex-RIM users. That, combined with the loss of the AT&T iPhone exclusive and the ensuing AT&T/Verizon turf war, might be enough to explain Android’s growth breather — there aren’t enough non-corporate sucky smartphones to convert any more, and the price is just now getting down into the “convert all the dumbphone users” territory. This current quarter should be interesting indeed.

Nokia is apparently ready to transfer some of its patents to start-ups or universities to foster the further development of the ideas and the creation of jobs.

Now thats what I call a poison pill. Here Mr Microsoft, you’ve just paid a lot of money to aquire patents that you don’t have exclusives on. I’m hoping the Nokia of old rises from the ashes in one of those start-ups. As an industry, we need their physical design skills.

Interesting stuff, but like lots of these data reports, lots of missing numbers (like relative growth month to month, in this case).

Also, financial industry activated by far more phones than any other industry in their survey. Given the sensitive business focus of their industry, and the perception that Android isn’t quite ready security-wise, and the amount of cash that some businesses are willing to splash out on phones, it comes as no real surprise that they are seeing 62% iPhone vs 38% Android (apparently they track WinMo and Symbian as well, but not RIM).

And AT&T must have been flogging a metric crapton of ancient phones — it looks like, even in March, iPhone 3 variants were selling at around 85% of the rate of iPhone 4V in businesses.

Finally, they also seem to think that the lull in Android growth will be short-lived:

In Good Technology’s Q4 2010 report, Android was showing steady gains on iOS in the smartphone category, but the launch of the Verizon iPhone 4 and AT&T’s subsequent iPhone 3GS price reduction in February have temporarily reversed that trend resulting in a drop from Android’s 44 percent of all smartphone activations in January to 35 percent in February. We still expect Android device activations to overtake iPhone in the smartphone category by year end given the number of devices and form factors available will be increasing through the year. Tablets continue be a significant percent of all activations, ranging between 18 percent and 23 percent over the period. We attribute the dip in February iPad activations to anticipated availability of the iPad 2, which was formally announced on March 2nd and hit the shelves on March 11th.

Finally, Android tablets are just starting to hit their radar:

iPad and iPad 2 are still dominating the tablet category, but Android tablets accounted for over 1 percent of all activations for first time in March, led by the Motorola Xoom.

> Rather, a startup (which he didn’t name) is tooling up to ship this fall. Unspoken but clear from what he carefully didn’t say is that there is serious VC or possibly Chinese government funding of the effort.

Unnamed VC leaks info about unnamed company in China, with unnamed source of funding to introduce very inexpensive Android handsets for third-world markets. Markets full of people unwilling or unable to pay service fees.

Makes sense to me.

I’m still waiting to see how these ‘SoC’ phones get to a manufactured BOM cost low enough to allow an unsupported $85 retail price.

@esr
“My prediction that somebody in China is planning a huge play in dirt-cheap Android SoC phones for Third World markets is correct.”

I suspect that will be for BRIC countries. I was wondering how they are planning data use. Over-the-air bandwidth seems to be limited even in the USA. So I assume that there will be a lack of 3G availability in BRIC countries. Especially if someone is dumping massive amounts of cheap smartphones on the markets.

Are they banking on an expansion of 2/3G bandwidth? Or rather domestic or public WiFi?

>Sorry, but TouchFLO was not a mockup. TouchFLO phones quite literally went on sale the same month iPhone went on sale.

>No, the software is not rocket science, either. Anything that could possibly be called a breakthrough, although I still just think it’s evolutionary, is on the user-interface side.

The fact that Patrick elected to separate ‘software’ and ‘interface’ tells me a lot here.

So ok, if you guys cannot see the gulf between prior touch interfaces like TouchFLO (or the one on your printer, ffs) and the original iPhone, then at least I understand why you are such die hard android afficionados. I guess you think the gestures and animations are just window dressing, and have nothing to do with the usefulness of the device. I guess you think that functionally speaking, the iPhone interface is just a modal screen full of virtual buttons, like the touch screen on a POS kiosk. And I suppose you think that form and function are two wholly separable concepts when it comes to interface design, just as you think the software and the interface are two wholly separable concepts. This, in a nutshell, is why *you* didn’t come up with the iPhone interface (which is now also also the Android and Palm Pre and Windows phone interface) back in 1987 or whenever it was you were originally pressing your laserdiscs and degaussing your EPROMs, and I guess it is why you are bewildered whenever they sell x million iPads or y million iPhones. And you probably think that Photoshop and GIMP are two identical products separated only by vendor lock-in and advertising budgets. In any case, I give up — I can’t show you something that you are unable to see.

Winter thinks that the Chinese have such a loyalty and a sense of responsibility toward Google’s Android…….?

Point is The Chineses hate Google with all its infested mole in the Mossad and CIA in it. Frankly why do they need Google’s technology anyway??? It doesn’t benefits the chine one damn way!

Just a bunch of Spying activity and Mind Manipulation… wonder how many color revolution started with those Moles in Google n facebook.

The Chinese are no “cow” and by no way are they turn into some dumb and big moth droid who can’t think for themselves. They have culture! And they have info to the hidden truth…n boy they can also play the game really well.

Not like some cultureless American who lost their freedom and right nearly 100 years ago to some stupid money people Now good luck in being an United state citizen you droidful American.

Droidful american who can’t see that build can be made to dust …with bombs! Where is the Geek among you?

Google’s android will be tear down by the Chinese and rid of all Googles useless services and replace with the chinese services.

Better the chinese spying on you than Google anyday.

The chinese will make their own Os UI base layer/base on Opensource Android + linux. and they will call it their Own Os! Just like Mac Os, Ios, web Os, QNx,solaris, Be is base on a version of Unix/Linux but their Os will be their own!

Eventually even the likes of Nook,Archos, Samsung, Htc and any successful vendor would do the same. Tell us which manufacturer needs all these useless Google’s services mandatory?

The just need the core Os and kernel part for free. the rest do it yourself or partner with Facebook,amazon,Yahoo,Bing,skyhook Maps,Opea,Mozilla or anybody else.

But just maybe googles is not so evil…. and they will never close any version of Opensourse android selectively!!!!

Opsss… forgot about Honeycomb…and how long have it been out officialyl? 3 month???

@Bennett
So ok, if you guys cannot see the gulf between prior touch interfaces like TouchFLO (or the one on your printer, ffs) and the original iPhone, then at least I understand why you are such die hard android afficionados.

@Bennett
I guess you think the gestures and animations are just window dressing, and have nothing to do with the usefulness of the device.

Of course they do! It’s stupid to say that gestures and animations are useless. Window dressing matter! But they matter a lot less then people who call iPhone the Jesusphone think. Note that most (but not all) gestures and animations which are touted as “great breakthrough” of iPhone were already in HTC Touch – as well as stylus-less interface. There were limitations because underlying OS was quite rigid and unflexible, but only someone who believes LG KE850 was the only touchscreen phone before iPhone can call these limitations (which are mostly overcome in latest models of Android phones) a sizable gulf. No, it was small additional polish – enough to sway US public (which was mostly ignorant about touchscreen phones) but not enough to even budge, for example, Japanese market (and other demanding markets).

@Bennett
This, in a nutshell, is why *you* didn’t come up with the iPhone interface (which is now also also the Android and Palm Pre and Windows phone interface) back in 1987 or whenever it was you were originally pressing your laserdiscs and degaussing your EPROMs, and I guess it is why you are bewildered whenever they sell x million iPads or y million iPhones.

Note that Apple somehow presented iPhone in 2007, not in 1987. The same month when first non-Apple phone with stylus-less touchscreen interface went on sale. Note how it was created by much smaller company and was sold by millions. Basically Apple builds things which are slightly more innovative by some metric then what Apple rivals are doing (and which were destined to linger in obscurity for a year or two without Apple intervention) and presents them as gift from gods. The most important unique thing Apple brought to phone market was not even multitouch or some additional polish. It was hype. Lots and lots of hype. Jobs is master of PR and RDF works wonders (compare reviews of iPhone4 before it was presented by Jobs on stage and after). But reality has a nasty habit it snapping back – you can only distort it so much before it refuses to cooperate.

@Bennett
And you probably think that Photoshop and GIMP are two identical products separated only by vendor lock-in and advertising budgets.

No, they are two similar products separated by network effect and lack of manpower in GIMP camp. There are literally tons of things GIMP can not do (but Photoshop can) which are essential in different workflows (CMYK support is prime example). When and where Photoshop drops the ball and offers less features – it quickly loses market to it’s rival. Polish does matter – but this is icing on the cake, not something essential.

Nokia’s announcement is now out. They’re cutting 7000 jobs, 4000 outright and 3000 by transferring the employees to Accenture for a year. The latter group comprises apparently nearly all Symbian development, so this amounts to Nokia handing Symbian over to Accenture to be quietly disposed of. In the process, Accenture can then hire the Symbian developers deemed worthy for its existing businesses. Of the 4000 to be fired, 1400 are in Finland, and of the Accenture group of 3000, probably most are in Finland. Nokia is not closing any offices in Finland at this point and the phone factory in Salo is supposed to continue business as usual.

MS suing Barnes&Noble over Nook. The answer from B&N is discussed on Groklaw. The patents are like the Emperors new cloths. It is very entertaining to read the lengths MS was going in trying to bind B&N to a NDA so the utter baselessness of these patents would not become public.

9. On information and belief, as part of Microsoft’s recently announced agreement with Nokia to replace Nokia’s Symbian operating system with Microsoft’s own mobile device operating system, Microsoft and Nokia discussed and apparently agreed upon a strategy for coordinated offensive use of their patents. Indeed, in videotaped remarks made two days after the Microsoft-Nokia agreement was announced, Nokia’s CEO Stephen Elop confirmed that Microsoft and Nokia had discussed how their combined intellectual property portfolio is “remarkably strong” and that Microsoft and Nokia intended to use this combined portfolio both defensively and offensively. This type of horizontal agreement between holders of significant patent portfolios is per se illegal under the antitrust laws, threatens competition for mobile device operating systems and is further evidence of Microsoft’s efforts to dominate and control Android and other open source operating systems.

….

that the NookTM infringed six patents purportedly owned by Microsoft. Microsoft had prepared claim charts purportedly detailing the alleged infringement but insisted that it would only share the detailed claim charts if Barnes & Noble agreed to sign a non-disclosure agreement (“NDA”) that would cover the claim charts as well as all other aspects of the parties’ discussions. Noting that the patents were public and that the infringement allegations pertained to Barnes & Noble’s public product, Barnes & Noble refused to sign an NDA. Insisting that an NDA was necessary, Microsoft discussed the alleged infringement on a high- level basis only. Microsoft nevertheless maintained that it possessed patents sufficient to dominate and entirely preclude the use of the AndroidTM Operating System by the NookTM. Microsoft demanded an exorbitant royalty (on a per device basis) for a license to its patent portfolio for the NookTM device and at the end of the meeting Microsoft stated that it would demand an even higher per device royalty for any device that acted “more like a computer” as opposed to an eReader.

….

Microsoft, however, continued to insist that it would not provide the basis for its allegations without first entering into a non-disclosure agreement. The parties therefore negotiated a form of NDA at this meeting entitled “Agreement” (the “Agreement”). The Agreement was very limited in scope, with “Confidential Information” defined as “any non-public claim charts provided to BN by Microsoft relating to the patents in dispute, any response(s) or discussions or product information provided by or from BN representatives.”

19. At the meeting, after the Agreement was executed, Microsoft provided Barnes & Noble with the claim charts referenced in the Agreement, which related to five of the six patents Microsoft had originally identified.

20. Tellingly, although Microsoft had insisted on entering into an NDA covering these claim charts, the charts did not contain confidential information but instead did nothing more than set forth the published claims of certain Microsoft patents on the one hand and publicly known features purportedly employed by the open source AndroidTM Operating System and the NookTM on the other hand.

@winter> It does look like you did not take your pills today. I cannot extract any sense from your writings.

It appears to me that ‘kk’ is a non-native English speaker. His point seems to be that Google has no need for any of Google’s “value add”.

This re-inforces my point that a China-backed all-out Android effort isn’t good for Google. The free R&D was supposed to keep people looking at Google ads, and using Google apps. And increasing number of Android devices are shipping sans any support for the Google proprietary bits. The Genie is either out of the bottle, or soon will be.

As stated before, patents are the kryptonite that just might stop Android. The fight B&N appears to be winning to put up over the Microsoft suit is admirable, but B&N is defenseless against a company the side of Microsoft. B&N’s total market cap is just under $600M (US). Microsoft? $220B. Microsoft makes $6.634B in net profit per quarter. B&N, at a mere 60.58M, is two orders of magnitude smaller in terms of cashflow, and cashflow is what makes the business world run.

About 500 requests for ex parte reexaminations are filed every year. The number corresponds to about 0.33% of the number of patents issued in a given year. About 60 requests for inter partes reexaminations are filed per year.[5]

About 64% of the patents in an ex parte reexamination have some of their claims not rejected. In 26% of the cases, all claims are confirmed. In other words, a patent is completely invalidated in only 10% of all ex parte reexaminations.[6]

Which means that you have a 64% chance of getting part of the patents thrown out and a 10% chance nothing is left. Wrt the US courts, these are good odds.

No, they are two similar products separated by network effect and lack of manpower in GIMP camp. There are literally tons of things GIMP can not do (but Photoshop can) which are essential in different workflows (CMYK support is prime example).

No, CMYK support is not a prime example. This is FUD. You can get CMYK support in the GIMP that will work well enough to do CMYK sepsfor professionally-printed materials. You do not need CMYK support for any other reason. All modern desktop printers are able to color match RGB profiles and, with a little work and a good monitor (IPS flat panel or high-quality CRT), you can calibrate your screen and printer for very, very good color matching. It’s not like the old days where this was impossible without a Mac and specialized equipment.

Note: I have worked as a professional graphics designer and I’ve had many happy customers, both freelance and as a hired hand. I know what I’m talking about.

(I’ve also been told that full CMYK support is in development, but I have not tested it as yet)

@Richard Thompson:
“Sigh. Must you blather on subjects about which you obviously know nothing?”

So patents are never overturned? Is that what you say. Then indeed I have been misinformed. I was told that you cannot infringe on an invalidated patent. And that you can ask for a reexamination of a patent in case of an infringement suit.

> Sigh. Must you blather on subjects about which you obviously know nothing?

What?!? And have comment threads all over the web go dark?

Besides, in this case Winter knew enough to be able to find a link and quote the article. That means he obviously knows something, about how to research and how to reason, plus enough about the topic itself to look up something useful. Oddly, you behaved in the exact same way Winter did. Therefore, based on the evidence before me, and example you gave, you are also blathering on subjects about which you obviously know nothing.

Just blatheringly doing my part to keep this comment thread from going dark.

And that you can ask for a reexamination of a patent in case of an infringement suit.

ISTR an article by “Roblimo” about how you should always go for the “do not infringe” defense first and only fall back on an invalidity defense as a last, last resort. Because the courts are going to heavily favor the patent holders and USPTO.

Sigh. Must you blather on subjects about which you obviously know nothing?

Project much? You keep harping on about “cash flow”. That word doesn’t mean what you think it means. A company can have revenues in the billions, yet have poor cash flow. Cash flow is a measure of liquidity, not profitability or relative size.

Now, if you were wondering why some folks around here might think you sound a bit crankish, now you know.

> Just blatheringly doing my part to keep this comment thread from going dark.

In this same spirit, I noticed I didn’t respond to this earlier:

@khim:

> Is it some kind of contest?

No contest on my part, although I will admit that when I write what could be perceived as a strong statement, like “Without Apple, there would be no Android” or “it’s been obvious for at least two decades that the right way to do a phone would involve a touchscreen”, and the response, instead of simply asking “What do you mean?” is something like “Sorry, but this is just stupid” or “This is so silly you deserve some kind of prize…”, my subsequent response is’t usually nearly as nice as it could be otherwise.

BTW, you’re well out of the “stupid asshole” category at this point. Bennett’s not stupid, either, and I don’t think he’s a genuine asshole — it may just be that he’s a little miffed that I don’t just curl up and crawl into the corner and suck my thumb when he says things like “it seems like you’re losing touch with reality.”

But once we get past all that, it is interesting to see the different takes on exactly where and when innovation happened, and the relative weights that different people place on the different innovations.

The commoditization of hardware technology is a predictable process of market evolution for tech products. Why is fringe innovation no less expectable?

No one says the future must look like the past, but it is probably true that the same processes and principles will be used to get there. Those who can understand and make use of them may be consistently better performers in their niche (commoditizers, innovators) than those who don’t (by way of having no actual game plan).

I would be willing to wager that HTC, Samsung and Apple are playing the same games in the next four-five years. Motorola less so, Microsoft and Nokia unknown, as their previous plans haven’t turned out so well, and so they’re trying to adjust.

And as a long as an entity is happy with the results of the plans and processes that it employs, it is likely to keep using them. When they fail or the plans and processes for some reason don’t grant them the previous success (outside influence, disruption?) they’ll change.

This is exactly what I meant by “more exposed than I thought” – unless Apple has a cash hoard nine times the size of God’s squirreled away somewhere a disruptive collapse of their iPhone business would leave them without much of a recovery path.

Well, they’ve got about $25 billion in cash, cash equivalents, short term investments, and net accounts receivable. So they could, say, buy, say, Time Warner Cable (or Northrop Grumman) with cash at the current market price.

Still, that only helps so far. If the iPhone collapses before Apple comes up with something new, there will be lots of investor pressure to use the cash to shore up the iPhone. (There’s no such pressure over the iPod’s recent decline because the iPhone came along first.) Jobs might have the cachet to fight it off and use the cash to fund something new anyway; a replacement likely would not.

many players in the market obviously expect volatility in Apple’s stock, but the short ratio shows that hardly any of them have the balls to outright declare war on the stock.

“Markets can remain irrational longer than you or I can remain solvent.” There’s a reason that’s become an aphorism. The only safe way to handle a bubble is to stay the hell away from it; premature Cassandras and the Greater Fools both lose their shirts.

I said, “In matters of patent law, pursuing invalidity is the defense of the damned.”

Winter counters with stats that show *ex parte* requests for invalidation generate a complete invalidation 10% of the time. 26% of the time, all claims are confirmed. The other 64% of the time, *some* claims are invalidated, but if you know something about patent law, you’ll know:

– that patents, once granted, are *presumed* valid
– that even if some claims are invalidated, the other claims (even the dependent claims) stand

Winter pointed to ex parte reexamination requests, but that means that the party making the request isn’t involved in a suit with the patent holder. From the same wikipedia article, “About 60 requests for inter partes reexaminations are filed per year.” Winter quoted this, but then ignored it.

Winter’s conclusion: “Which means that you have a 64% chance of getting part of the patents thrown out and a 10% chance nothing is left. Wrt the US courts, these are good odds.” is unsubstantiated by the facts he presents. These ‘facts’ were for ex parte reexamination requests.

The very low number of inter partes requests should give some indication of how successful pursuing invalidation is during an infringement suit.

As for cash flow, I said: “Microsoft makes $6.634B in net profit per quarter. B&N, at a mere 60.58M, is two orders of magnitude smaller in terms of cashflow, and cashflow is what makes the business world run.”

Last quarter, Microsoft’s net cash flow was ~4.2B, while Barnes Ignobel’s was ~$213M. Sorry, not two orders of magnitude, only a factor of 20X. But the holidaze are good to B&N, as their previous quarter’s cashflow was $34m, which *is* “two orders of magnitude smaller” than Microsoft’s. Quarters previous to that generated hundreds of millions of dollars of net negative cash flow.

Moreover, in a well-run company, net profits are a good proxy for net cash flows. The typical ‘adjustments’ are for things like deprecation, and deltas in inventory, receivables, and liabilities. In a well-run company, and outside of exceptional events, these items are more-or-less steady state.

> Especially while their chief innovator is no longer active in day-to-day operations.

It’s unclear that Jobs’ role is to innovate. It seems much more the case that Jobs’ role is to reject ideas for not being good enough, or to trim ideas that are not in-line with Apple’s spartan product lineup.

Sans Jobs (a point Apples hasn’t reached), it seems that creativity would overflow Apple, though things didn’t go off the rails the last time Jobs had an extended absence.

The whole, “Apple will fail, because Steve Jobs is going to die soon!” is a bit too macabre, even for this blog.

@esr> This is exactly what I meant by “more exposed than I thought” – unless Apple has a cash hoard nine times the size of God’s squirreled away somewhere a disruptive collapse of their iPhone business would leave them without much of a recovery path.

Apple’s cash for short-term and long-term marketable securities totaled $65.8 billion at the end of the March quarter. Cash increased by $6.1 billion over the previous quarter.

If Apple suddenly had no revenues, the current cash (including long term, but still liquid holdings) would sustain current operations (SG&A and R&D) until the middle of 2018. Eric’s assertion is refuted. Entirely.

Cash growth in just this last quarter was higher than the market cap of many companies. For example, if pre-payments were added back, Apple’s cash hoarde increased by about the market cap of Motorola Mobility. Hello Droid, how’s your sister Xoom?

Current Apple cash is worth more than Nokia, RIM and Motorola Mobility’s market caps, *combined*.

All this collapse speculation seems to be based on “windows beat mac and pushed it to niche status, therefore android will do the same to iPhone”
There is no rule that there has to be one winner. The history of the phone market certainly doesn’t bear out the one winner theory.
I think a more reasonable prediction would be Apple ends up with 20-30% of the first world market. Lower in less developed markets. And don’t count out WP7 and HP WebOS yet. I doubt they will succeed, but you never know…..

>>> “Markets can remain irrational longer than you or I can remain solvent.” There’s a reason that’s become an aphorism. The only safe way to handle a bubble is to stay the hell away from it; premature Cassandras and the Greater Fools both lose their shirts.

Apple is not a bubble. The shares are actually quite cheap at current prices.

I know I’ve probably said that ’til I’m blue in the face. The smart and quite rational move is to go long.

And for all the talk of IPhone, no seems to be noticing that Mac posted nice growth of 28%. This is the 20th straight quarter that the Mac line has grown faster than the PC business as a whole.

All this collapse speculation seems to be based on “windows beat mac and pushed it to niche status, therefore android will do the same to iPhone”
There is no rule that there has to be one winner. The history of the phone market certainly doesn’t bear out the one winner theory.

My thoughts exactly phil.

My understanding is that there are software development tools that make it easy (or at least easier) to develop for both Android and IPhone. This is different from the Mac and PC days, when it had to be one or the other.

>The whole, “Apple will fail, because Steve Jobs is going to die soon!” is a bit too macabre, even for this blog.

I think Jobs’s impending demise, in itself, would be quite a manageable problem compared to Apple’s exposure to technological disruption. It will compound their problems if and when that happens, though, because anyone but Jobs is going to be much less able to sell Apple’s board on cannibalizing their own high-end business in order to fight Android at its own price levels.

Moreover, in a well-run company, net profits are a good proxy for net cash flows.

Not necessarily. Cash flows indicate short-term health, while net profits indicate long-term health. While the two are often related, this is not true in all cases, and is especially not true in certain industries, such as those with heavy seasonal effects.

The typical ‘adjustments’ are for things like deprecation, and deltas in inventory, receivables, and liabilities. In a well-run company, and outside of exceptional events, these items are more-or-less steady state.

If cash flow is being adjusted for discouraging the use of old, outdated technology, they’ve got bigger problems than cash flow!

In the tech sector, cash doesn’t make as much difference as you think it does. Microsoft once had a much larger pile of cash than it does now, and the company’s products are quickly becoming irrelevant. In a lawsuit such as the B&N case, financial health only matters if a lengthy, extended trial is expected. I expect B&N and Microsoft to settle out of court.

I think Jobs’s impending demise, in itself, would be quite a manageable problem compared to Apple’s exposure to technological disruption.

Agreed. Too many eggs in one basket in the tech sector is never, ever a good idea. Build your business around a singular product and you become a buyout target. Hmmmmm…..maybe this is an angle Jobs was actively pursuing?

OT but tangentially relevant since the plaintiff was AT&T: The Supreme Court has ruled that corporations may forbid class-action litigation against them and compel one-on-one arbitration.

Since this is real life and not The Moon is a Harsh Mistress, the arbitrators are more likely to favor their benefactors — the large corporations. This is pretty much carte blance for the little guy to be screwed by big business.

Oh, and the justices’ opinions fell strictly on party ideological lines: the conservatives favored this, the liberals were opposed.

Bearing in mind what Morgan said, there are some good data snippets there. Also, I believe a lot of corporations require your personal cell phone to adhere to their security guidelines if you want to be able to receive corporate email, so I don’t think the corporation angle is completely missing from this data by any means (especially if it doesn’t include 13 year olds like the comscore data does).

For the first time a majority (54 percent) of all new mobile-phone handsets purchased by U.S. consumers were smartphones.

That’s new and exciting.

… in the first quarter (Q1) of this year Apple’s mobile phone sales reached 14 percent of the U.S. market. …

The Android OS lost ground for the first time since Q2 2009, falling to 50 percent of smartphone unit sales in Q1 2011 compared to 53 percent in the prior quarter. Apple iOS share rose 9 percentage points to comprise 28 percent of smartphone unit sales. BlackBerry OS also lost ground, falling 5 points, to 14 percent.

That seems pretty consistent with other reports that I have seen and reported on in comments here.

My gut feeling is that:

1) Most non-corporate RIM phones are long gone, and Apple is now eating RIM in the business world. Android is not there yet because of real and/or perceived security issues (hackability, etc.)

2) Because of some pent-up demand at Verizon and because AT&T was flogging really cheap iPhone 3’s, Apple stunted Android’s growth for the quarter.

Ahhhh, something really good. We don’t usually get enough data to tie it all together. If we make the assumption that Apple activations in Q4 were approximately equal to sales, then 2.2M + 3.6M = 5.8 M Apple activations as 28% of this quarter’s smartphone market, which would make the total market 5.8 M / .28 or 20.7 M units, and last quarter’s total 20.7 / 1.08 or 19.2 M units

Unfortunately, the numbers don’t quite line up right, because calculated Apple Q4 sales at 19% of the 19.2 M number is 3.6 M, far less than the 4.1 M activations AT&T reported for that quarter. But we know that the corporate purchases are going to skew this a bit, too. Maybe there were a lot of those at the end of the calendar year due to leftover budgets.

Anyway, ignoring that discrepancy, and assuming that all iPhones purchased this quarter are comprehended by the report (which isn’t going to be true either…) and just using the data points in the article plus 5.8 M Apple phones for the quarter:

My takeaway is that if Apple wants to keep doing this well, they need to keep selling them cheap (for an ever descending value of cheap), and if Android wants to regain momentum, there are two key differentiators they need to overcome — corporate acceptance for the BlackBerry crowd, and they need to get google music in gear to compete with iTunes for the personal crowd, AND they need to retake the low ground on pricing.

@twilightomni: “That is probably true, if Steve Jobs is the only flexible person at Apple with the willpower to change the direction of the company.”

Change “willpower” to “influence” and it may well be correct. “Willpower” is a term for an individual’s internal state of self, without regard to the outside world; “influence” better points out that the issue is having the ability to change what other people do in response to your belief.

“For the first time a majority (54 percent) of all new mobile-phone handsets purchased by U.S. consumers were smartphones.”

@patrick: “That’s new and exciting.”

Not surprising, though. I bet if you exclude low-cost prepaid phones (e.g., Tracfones), that number will be significantly higher. It’s one thing to keep the dumbphone you’ve been using for years and don’t want to replace; it’s another thing to buy another dumbphone when cheap smartphones are either available or clearly will be soon (for different values of cheap). Of course, the price of the data plan plays a role in this, which is why I argued that Sprint is better positioned than AT&T or Verizon to capture the large base of highly-price-sensitive dumbphone users.

@patrick: “My gut feeling is that…most non-corporate RIM phones are long gone, and Apple is now eating RIM in the business world. Android is not there yet because of real and/or perceived security issues (hackability, etc.)”

I agree. It would be interesting to see if anyone has actual data on non-corporate RIM phone plans currently active, but I’ve never seen any data like that anywhere. Without a strong corporate market, RIM is toast.

@patrick: “My takeaway is that if Apple wants to keep doing this well, they need to keep selling them cheap (for an ever descending value of cheap)…”

How do you define “keep doing this well”? My understanding is that you believe Apple should and will ultimately retreat to the high-end, with cutting-edge phones that offer good margins but low penetration. I don’t see that Apple needs to sell ever-cheaper phones to accomplish that, though there is bound to be some erosion in the prices people will pay at the high end as lower-end phones become ever more capable at ever lower prices. On the other hand, if you were saying that for Apple to retain and build its share it needs to ride the price/value curve downward, I think we all agree that that would be necessary. Is there anyone on this blog that believes apple can retain share well into double-digits at its current price point?

@patrick: “and if Android wants to regain momentum, there are two key differentiators they need to overcome — corporate acceptance for the BlackBerry crowd, and they need to get google music in gear to compete with iTunes for the personal crowd, AND they need to retake the low ground on pricing.”

I disagree here; I believe that Android can grow tremendously and establish momentum without ever breaking into the corporate Blackberry crowd. That’s not to say they shouldn’t pursue it — it’s clearly an opportunity — but success there is not necessary to Android’s success.

Android absolutely does need to take the low ground on pricing, but I can’t imagine a future in which that doesn’t happen. Apple may (or may not) generate good value-for-price, but they are never going to be the low-price competition. Refurbs can only take you so far.

> I argued that Sprint is better positioned than AT&T or Verizon to capture the large base of highly-price-sensitive dumbphone users.

I can’t really disagree with this, but I have to say after looking at the data for last quarter, that most of the dumbphone users are Verizon’s to lose. When Sprint or its prepaid subsidiaries make data+voice attractive to enough Verizon voice customers, that’s when the needle starts to move. Verizon either doesn’t really have the data capacity in hand yet (which makes sense if you look at the agreements they were trying to put in place with google for data management), or is really trying to milk it. But they are going to have to be extremely careful on the management of the plan prices to not bleed to sprint.

> How do you define “keep doing this well”? My understanding is that you believe Apple should and will ultimately retreat to the high-end,

Sorry, yes. In the context of previous post, “keep doing this well” means market share gains against Android. I do believe that long-term that is probably the wrong strategy for them, but in the short term, building up all the mindshare they can among potential users while margins are still reasonable makes absolute sense. I think I’ve said before that they should carefully manage their retreat up the value chain.

> Is there anyone on this blog that believes apple can retain share well into double-digits at its current price point?

As long as the current price point includes the $19 refurbished iPhones phones at AT&T, yes, although those are going to have to start being iPhone 4s :-)

> I believe that Android can grow tremendously and establish momentum without ever breaking into the corporate Blackberry crowd.

Worldwide, I absolutely agree. In the US, to corner Apple and keep them boxed in, I think this segment would be very useful. In terms of profits for both Apple and Google, the US is one of the bigger fairly homogenous battlegrounds, and one of the major market segments in the US is something that conforms to corporate security. RIM is all that’s left in terms of other smartphone competitors, and that has to be the differentiator between RIM and all the already dead combatants. You’re absolutely right that there still are a lot of dumbphones for the converting, but in the US, that’s rapidly shrinking, and anybody who gets work to pay for their cellphone is still going to run up against the corporate security mandate, because the corporation is not going to pay extra for a smartphone unless you can get your emails on it.

Short term, I don’t think there are going to be too many conversions from Android to Apple or vice-versa, so it may be that corporate security is an even bigger issue than iTunes for the wider non-iPhone, non-Android US market.

> Android absolutely does need to take the low ground on pricing, but I can’t imagine a future in which that doesn’t happen.

Apple has enough money that they could compete on price for a couple of years. And the will almost certainly continue to overbuild old models when they bring out shiny new ones, as well. Still, I’m sure that when a new iPhone on contract will cost you $0, you’ll be able to get an Android phone on contract for the same $0, but with a $100 mail-in rebate.

I don’t know what to make of the NPD results – they’re inconsistent with the Kantar and Neilsen annd comScore numbers (and I consider the comScore numbers, especially, to have a good reliability record). Perhaps we’re seeing artifacts from a different sampling method. 9% seems a bit high as a plausible bump from the 4V sales.

> Please identify the specific constitutional provision or specific law that you think that the conservatives got wrong.

I didn’t study it very carefully, but to the extent it relates to physical signatures, I think they got it right. Unfortunately, too many people have gotten used to clicking “I agree” on 500 pages of text crammed into a 20×30 pixel area, so I would be hesitant to say that the meeting of the minds required for true contract formation was satisfied by most online transactions. That would have to be decided factually, on a case-by-case basis, depending on the exact steps the user had to go through to execute the “contract.”

BTW, I hate arbitration clauses, but (for example) the last time I bought a new car, I just scratched through it and initialed it on the contract at the dealer. Too many people think they’re powerless in these situations, but the commissioned schlub isn’t going to bat an eyelash about non-substantive changes like that, and if you try to change something too drastically, the higher-ups will come out and attempt to renegotiate in a couple of days.

I don’t think I’ve met a “standard” contract in the last decade that I didn’t alter before signing, and I’ve only once had anybody balk — I wound up not taking a small consulting gig because the multimillion dollar defense contractor wanted me to indemnify them against patent infringement for the two days and $2000 worth of FPGA work I was going to do for them. We never came to a meeting of the minds on that — after about 5 go-arounds, where they kept hiding the indemnification in a different section of the contract, I politely told the poor grunt who needed my help that he was welcome to call me again if they ever managed to get their lawyers back on the leash.

The Wall Street Journal reports that RIM is feeling the pinch in their quarterly numbers. I don’t see where they expect their “strong revenue growth” to come from — the tooth fairly, perhaps? Motorola seems to be doing well, and I’d be curious to see what’s driving that. It’s clearly coming from smartphones, not tablets.

—-

“RIM said it now expects shipments of BlackBerry smartphones for the quarter, ending in May, to be at the lower end of the range of 13.5 million to 14.5 million forecast in March. It also said it expected a shift in the mix of devices to lower-price models.

“RIM said the lower shipments and mix shift will result in revenue slightly below the $5.2 billion to $5.6 billion estimated forecast in late March. RIM said it expects to achieve full-year earnings per share of about $7.50, anticipating ‘strong revenue growth’ in the third and fourth quarters of the fiscal year.

“Motorola Mobility Holdings…said Thursday its revenue from mobile devices jumped 30% to $2.1 billion. The company said it shipped 4.1 million smartphones – up from 2.3 million a year earlier –as well as 250,000 of its new Xoom tablets, which debuted Feb. 24.”

I think the number may be a bit high, but I think refurbished or held-back 3s moved the market more than 4V sales. AT&T iPhone 4 wasn’t new by 6 months any more, Christmas had already passed, etc. What the hell was AT&T doing activating 66% more units than Verizon in Q1, especially with all the pent-up Verizon demand, and everybody knowing 4V was coming by the beginning of the quarter?

Also, one thing we haven’t really considered here is “what is an AT&T activation?” Steve Jobs accused Google of counting upgrades in activation numbers — was this projection? If AT&T counts upgrades as new activations (which Jobs can wash his hands of, since it’s not reported in his numbers) then anybody who bought an iPhone 4 when it first came out and then gave his iPhone 3 to his kid or a friend would cause an extra AT&T activation. That could partly explain why the AT&T and Verizon iPhone activation numbers don’t show the same unit growth as this report would suggest.

Bear in mind, that in addition to different survey methodologies (personal over 18 for NPD, v any over 13 for comscore, v ??? for Nielsen), that if Nielsen says Android 50% and Apple 25% for March, and NPD says Android 50% and Apple 28% for the quarter, those look like rounded numbers. Nielsen might think apple is 25.4999% and NPD might think that apple is 27.500000001%, so they might only be 2 points apart. Not nearly as goofy as some of the other surveys we’ve seen, especially if Apple did see a small bump before March based on pent-up Verizon demand.

Is it really that difficult to comprehend that the Android/Apple struggle is between competing smartphone-software ecosystems, not individual handsets? I don’t think so; this article is just denial talking.

There is an endless stream of reports coming out these days about how Android stacks up against the iPhone. The problem is, most of them are flawed.

Here is the first giant flaw — you may have noticed in the headline of this story. You cannot compare Android to an iPhone. That’s comparing an operating system to a hardware device.

The article goes on to demand that if you are comparing operating systems, you “factor in all of the devices that use iOS including iPhones, iPads and iPod touches.”

But on this blog, in the category entitled “The Smartphone wars,” we’re interested in smartphone OS market share for good and well-explained reasons, and we may later consider tablets worthwhile.

The specious argument that we cannot usefully compare the category of “smartphones running iOS” against the category of “smartphones running Android” against the category of “smartphones running Symbian” etc. has been thoroughly debunked multiple times on this blog. But saying that we shouldn’t look at OS market share within a single device category really is a stupid argument.

Sorry, but that’s what people do. OS market share for desktops. For servers. For supercomputers. So why does it suddenly need to be “for cellphones, tablets, and portable media players”?

> So why does it suddenly need to be “for cellphones, tablets, and portable media players”?

Obviously, that was a rhetorical question, and the correct answer is “because some data recently came out that showed that I’m losing badly, but I can spin it so that I’m winning handily.”

In other words that article is the Apple fanbois’ equivalent to the Republican consensus du jour: “Look how Obama is trying to distract us from real issues by releasing his birth certificate. (Which, btw, is fake anyway.) And where are his college records?”

Agreed, the Loop article is amusing. Presumably the writer would have argued in the mid-to-late 80’s that the IBM PC was the #1 seller, the Mac #2, and all the various clones lagging behind. I expect he would have rejected any attempt to lump “XT/AT’s and their clones” into a single group and compare that with Mac sales.

@Cathy: “I argued that Sprint is better positioned than AT&T or Verizon to capture the large base of highly-price-sensitive dumbphone users.”

@Patrick: “I can’t really disagree with this, but I have to say after looking at the data for last quarter, that most of the dumbphone users are Verizon’s to lose. When Sprint or its prepaid subsidiaries make data+voice attractive to enough Verizon voice customers, that’s when the needle starts to move. Verizon either doesn’t really have the data capacity in hand yet (which makes sense if you look at the agreements they were trying to put in place with google for data management), or is really trying to milk it. But they are going to have to be extremely careful on the management of the plan prices to not bleed to Sprint.”

I agree with this, modified with the thought that I have seen no sign that Verizon has taken even small steps in the direction of better plan prices for cost-conscious consumers. When someone in this thread said that Verizon appears to know that they have the value-oriented consumer base, and is actively using this as a tool to manage their limited bandwidth, it immediately rang true to me. Short-term, that may be the best strategy.

But where is Verizon’s attempt to compete with Virgin Mobile USA and Boost Mobile? I’ve pretty happy with my current dumbphone Verizon coverage and service, but there isn’t the faintest chance I will switch to a smartphone on their network at current Verizon pricing. Whereas the combination of $200 smartphones and cheap Sprint all-inclusive plans has just about convinced me to ditch the Verizon and Tracfone and move on. Multiply that by a really large number of “laggard” consumers who always exist on the far side of the innovation chasm, and you have a huge opportunity (for Sprint) and a long-term threat (to Verizon).

If I were running Sprint, I would have been dancing with joy after the T-Mobile announcement. Someone is going to get the value market as large numbers of remaining dumbphones users convert, and it isn’t going to be a provider whose notion of data plan fees is totally out of whack line with $200 no-contract phones.

Is it really that difficult to comprehend that the Android/Apple struggle is between competing smartphone-software ecosystems, not individual handsets? I don’t think so; this article is just denial talking.

And is it really that difficult to remember that that is what we’re talking about in this blog.

I mean if in that guy’s world view the point that matters is that Apple is swallowing more profit than any other manufacturer, well props to him. But posting that link here is like posting a link to the bible in a newsgroup about evolutionary science. Without information on why you bothered it’s basically content-free.

And it sometimes feels like this sub-thread basically happens in every smartphone wars post.

Recently we had a company newsletter where they talked about using IPads in the cockpits of the aircraft, to replace paper charts and so forth. And top brass at Humana have ordered that these things be brought into the data center, despite the grumbling of some of the IT staff.

The Good report mentioned Pads being used by doctors and other professionals. It is a “+1″ device used mostly by consumers and not creators of content.

These things are going to be huge. We have barely seen the beginning of what will be done with these devices.

@Patrick Maupin”The total size of the Android market is expected to catch up to the iPhone app store within 5 months. And, there are already more free Android apps than iPhone apps.”

This was inevitable as Apple rejects many apps. I think the app count for iPhone vs Android phones is a useless metric. It’s useful when comparing to a new platform that has say a couple hundred apps like the Android tablet market or Playbook. But does it really matter if a smartphone has 300K or 400K apps? At that point it becomes about quality.

@Patrick Maupin “I think this is probably true. But I also think we’re going to see exactly the same late start and furious ramp on Android versions of these as on the smartphones.”

There is one major difference….. iPad has a huge lead with no serious competition yet. iPhone never had a lead and entered a crowded marketplace. I hope android gets some serious market share though. Apple gets less restrictive when they are worried.

I want to see the guy’s SAT scores. ‘Cause we’ve been told by all types of people how he’s the most brilliant president evah, how his IQ is above 140 and so forth. And this isn’t some anonymous schmoes – the first was an actual historian, the second an anthropology blogger with a Harvard Ph.D. I have never seen such shameless bullshit in my lifetime. There’s not a chance that dude has an IQ even a SD below that.

But does it really matter if a smartphone has 300K or 400K apps? At that point it becomes about quality.

I agree completely. App market size is a dick measuring contest. Apple fanbois have been engaged in this dick measuring contest since day 1, because theirs has been considerably bigger. But that is only because Android hasn’t hit puberty. Once Android’s is bigger, then it will be “but I’m older and more experienced, and I know how to satisfy my partners better” and they will continue to firmly believe no matter what happens in the app markets after that point.

Anecdotal evidence that benefits of Android openness are starting to show up in real life:

There is an interesting device called the Eye-fi. It plugs into a digital camera like a regular SD memory card, but creates a small WiFi hotspot, so that you can use your smartphone in conjunction with a much better camera:

You get the benefits of a standalone camera — its zoom, its strong flash, its high-resolution sensor and other features that trump the smartphone — with the ability to post photos right away. It works with videos, too.

Although I’m sure that if Apple had invented this, it would work flawlessly, because Apple didn’t invent it, it apparently works much better on Android:

The Eye-Fi is designed to send photos to iPhones, iPads and devices that use Google Inc.’s Android software. Working with an iPhone and iPad proved cumbersome and unreliable. The process was much easier on an Android phone or tablet, but I still had glitches.

…

Despite its lack of reliability and some shortcomings, I think you’ll find the Eye-Fi useful if you’re a camera bug and have an Android phone.

Owners of iPhones and iPads will be better served by Apple’s Camera Connection Kit, which costs $29. It’s simply a memory-card reader that attaches to the USB port, so there’s no need to fiddle with a camera that has no idea it’s been kicked into the future and is now a wireless device.

While I agree with DarrenCardinal that tablets are going to be huge, the article may have a point that many people who are likely to be tablet early adopters are the same people who are in the friend of Apple camp.

Of course, I think price also has a lot to do with it. It’s a lot easier to take a flyer on a device you’re not sure will fit into your usage patterns if the device is dirt cheap. And that’s coming.

I don’t think his argument is very convincing. I think the reason we haven’t seem big Android tablet sales yet is that product offerings we’ve seen so far suck pretty badly on the hardware side – overpriced, underpowered, flimsy, or two or three of those at once. That will change rapidly as the SoC-based systems begin shipping.

Once Android’s is bigger, then it will be “but I’m older and more experienced, and I know how to satisfy my partners better” and they will continue to firmly believe no matter what happens in the app markets after that point.

Every one-time dominate platform has had some sort of killer app that helped propel it to total dominance: for CP/M it was WordStar, for the Apple II it was VisiCalc, for the MS-DOS PC it was Lotus 1-2-3, for Windows it was Microsoft Office.

Android doesn’t really have one yet. Neither does iOS. And I don’t think NFC is it yet, but I think it will play a role.

In my simplistic view, all of these reduce to price. An underpowered, flimsy Android device is probably good for a hell of a lot of things if you don’t have to pay too much for it.

So, to his point, I think there are early adopters who either prefer to buy Apple or don’t mind Apple, a very few hardcore Android tablet early adopters, and a lot of would-be Android tablet adopters, who are simply price conscious, but not in the normal sense.

I think the price-consciousness is implicit, based on perceived future network effects. Sure, I could afford a Xoom, but I want something that will be available cheaply and have a lot of buyers, so that I have company, and Motorola is not doing the right things to make sure that a Xoom investment will be rewarded appropriately.

Essentially, I place early adopters into two categories — those who do it for status, and those who just do it to be ahead of the curve. Those in the latter category want to make sure that the manufacturers are at least moving in the right direction to create the curve, and a lot of those in the former category will think that Apple branding imparts extra special status.

That may not be exactly what was written in the article, but that was my take-away.

@Morgan:

Every one-time dominate platform has had some sort of killer app that helped propel it to total dominance

Yabut… There are now legions of programmers, legions of dirt cheap development hardware and software, and the necessity for any lovingly handcrafted assembly language is typically limited to a very few areas where utmost performance is required, and 99% of all development will be easily ported.

Unless Apple or Google does it themselves and creates major patent roadblocks for the competition, it seems unlikely this sort of history will be repeated.

OTOH, I can think of one candidate for “killer app” where I believe an open source OS like Android will have the advantage hands-down. It’s certainly not a traditional app, but built-in, easily auditable and updatable security, so the users aren’t continually paying rents to the “security” vendors could be golden.

This is the moment of truth. Is the open source development model really better for making things secure, or are Linux desktops just not worth developing viruses for because there aren’t enough of them? Stay tuned for more on this breaking story…

What if many people purchase the iPad on faith? Faith that it will be useful to them sufficiently to justify the price without actually having a use or uses in mind that would justify the price in advance. It seems to fit the fanboy (fanboi?) mind set, i.e., whatever Mr. Jobs makes available is going to be worth the price. As a non-fanboy, I lack that kind of faith. I have one use in mind: I want to play “Angry Birds” or some other games whilst on the elliptical trainer, and I don’t want to pay much over $100 to do it. The lack of fanboy faith seems to me to be a likely reason the Android tablet market hasn’t taken off, yet, and it fits the price-consciousness value proposition theory.

FWIW, I actually think that “the killer app” idea is pretty out of date. It was based on a scarcity model that is much less apparent today. Apps, in particular, usually have fairly small amounts of functionality compared to full blown desktop applications, and consequently, they can be reproduced very quickly. So if Android (or RIM, or NoWin or iPhone or…) brought out a killer app, it would be duplicated within a month on all the other app stores. I really don’t think apps have a high enough barrier to entry to give any one platform much of an advantage. (I think I have said before, any app that has a significant reach is available on all platforms.) And FWIW, I credit Apple with their hyper low transaction cost App development cycle for making that possible.

Morgan does identify one area where differentiation can be made, and that is the availability of peripherals like an NFC reader. This sort of thing is both a pro and a con for Android over iPhone. iPhone can’t bring out the same number of models that Android does, but Android has to somehow organically coalesce on the right peripheral set, and without a high level of such coalescence the result is market fracture.

What I don’t quite understand is why there isn’t a stronger market in external peripherals. For example, it would not be particularly difficult to create a device that was bluetooth enabled and had a circle of strong IR LEDs. With a simple microcontroller, you could have a device that sits in your living room as a remote control proxy, which would allow an app to make your phone a universal remote control for all your devices that use an IR remote. The BoM on that can’t be more than $15, so $40 retail, or $25 over the net, and I’d buy one in a heartbeat.

Netflix is also hesitant to bring its app to Android. I’m not sure whether there are areas other than music and video content where Apple has the advantage, and Android can’t get a foothold — maybe eventually, but the delay is problematic.

“…it would not be particularly difficult to create a device that was bluetooth enabled and had a circle of strong IR LEDs. With a simple microcontroller, you could have a device that sits in your living room as a remote control proxy, which would allow an app to make your phone a universal remote control for all your devices that use an IR remote.”

The device probably doesn’t exist because all the controlled devices will soon be bluetooth enabled themselves. No need for that IR remote that always gets lost, plus a path back to other devices, like earphones, etc. This all will happen just as soon as you ramp up production on your great invention.

What I don’t quite understand is why there isn’t a stronger market in external peripherals. For example, it would not be particularly difficult to create a device that was bluetooth enabled and had a circle of strong IR LEDs. With a simple microcontroller, you could have a device that sits in your living room as a remote control proxy, which would allow an app to make your phone a universal remote control for all your devices that use an IR remote. The BoM on that can’t be more than $15, so $40 retail, or $25 over the net, and I’d buy one in a heartbeat.

What, you mean like this? More than your desired price point but I’m not sure that Bluetooth modules are super-commodity. Could be wrong, though.

This is the moment of truth. Is the open source development model really better for making things secure, or are Linux desktops just not worth developing viruses for because there aren’t enough of them? Stay tuned for more on this breaking story…

Agreed that Unix security has some really rough edges. But it’s still better than Windows security. As far as SSL, SSH, etc., they are only add-ons because they weren’t needed at the start, back before there was networking, or even when networking was added by Berkeley in a free-for-all academic environment. And the unix model allows for these pieces to be put in place after the fact, and the open source model allows a lot of people who can’t be bothered to disassemble an OS to more easily examine the code and reason about security problems.

As far as the UT security guides go, why not point to the main page, where you’ll find that the guides for securing both Windows and Mac OS are longer.

I’ve been speculating for awhile that Apple is walking a tightrope in the US: don’t drop the margins too much, but still sell as many as you can to hook people on the system. The tools they use to do this include selling older models for cheap, lots of refurbs, etc.

Here’s an anectodal report that seems to confirm the rationality of such a strategy:

This is a race to provide users with capability, not a phony WWF death match. Both Google and Apple can try out
new things and then tweak / copy / enhance / re-invent.

Apple is in a position of profiting wildly from its 2007 disrupter and is building nicely on its 2010 innovation
as well as having out-grown the industry for 7+ years with its 1980’s gizmo. In the last couple of years it has
gone from nowhere to the leading phone manufacturer (by revenues). And because some Wall Street types see Apple
‘s success as narrowly based on 2 or 3 home runs in its recent at-bats, they’re dubious enough about giving Appl
e stock any more than the valuation you’d give a no-growth railroad company (Gene Munster’s words).

Google likewise had a blockbuster innovation in search that they’ve turned into a bankable product, but Android
is, by their admission, more a tiger by the tail — a defensive move to keep from getting cut out of mobile users
‘ ad revenues. They get essentially squat from their giveaway that they wouldn’t have if they had continued to e
njoy the sort of favored placement they have always had on iPhones. Alas, they would not have; as some Android p
hones have shown, money-hungry OEMs are quite happy to cut deals with Bing. So Google HAD to do mobile to keep t
heir money-making portals going — a great insight/inspiration by Page, I guess — even though mobile revenues are
still a tiny deal to them. And their plan for monetizing Android appears a big secret to even themselves, so in
vestors punched down the stock a couple of percent a few minutes after THEIR quarterly call. (For the record: th
ose were the shareholders, often big pension funds or others whose own $millions were at stake, bailing before t
he analysts could offer up their opinions.)

So, two companies, very similar products and very different businesses. I like to think of Stein’s Law: when som
ething can’t keep going, it won’t. I think Android will have a very different business model in a year or two, a
nd I think Apple will likewise have reached out in brand new ways to continue its explosive growth. And both wil
l prosper more for it, as will their customers benefit.

Actually, no: they don’t. They’ve approved hundreds of thousands of apps, and rejected hundreds. A majority of the rejected apps are remedied and approved eventually, as well. (The most common reason for rejection being that the app is broken.)

DocDoc Says:
>But this is not necessarily symmetric. Apple has the confidence of content providers where Android does not. Look at the problems Google has had with its music service

You make a good point, this is definitely advantage Apple. But it is temporary. Once Android hits, say, 50% of of the US installed base the content providers simply won’t have the luxury to ignore it. The purveyors of DRM content are already beginning to give in. It’s only a matter of time. Every Soviet walled fort eventually crumbles.

The problem with the iPhone app situation is not that they DO reject apps but that they CAN reject apps, it is a control grab of the kind that would make Bill Gates blush. However, I’ll grant you that the existence of a strong competitive Android takes a lot of the edge off (as Google themselves recently proved.)

Thanks for the guy who referenced me to the BT IR Remote device .

Oh, and FYI, those of you who are interested in targeting programs to Android and iPhone platforms you might want to look at Mono. You can use the same code on both, only retargeting the front end views, and access the native APIs of both. Plus you get to program in C#, which is far and away the best programming language I have every used, for sure the apotheosis of its paradigm. FWIW, I haven’t actually used Mono Android or Mono Touch, but it looks pretty interesting, and all open source — woo hoo! C# or Java or Objective C? That isn’t a difficult choice.

The problem with the iPhone app situation is not that they DO reject apps but that they CAN reject apps.

As can Google. They have the same ability to prune their app garden, they just don’t use it…until people (and the press) really start fussing about something. It’s reactionary as opposed to (er…presumptive? pre-emptive), and in a world where the entire app repository is corporate-controlled anyway, what’s the difference? The idea of putting whatever you want into either app store is an illusion.

*Android* itself allows you to side-load apps and the possibility of alternative app stores, and that’s the best part – but the part that doesn’t actually extend Google’s Android market strategy (other than good will). They *depend* (in America, anyway) on you wanting the Google brand and Google services to sell you these phones. It’s a hook.

(This is aside from apps that perform a function but are hindered because they compete with the company’s OS strategy itself – iPhone wifi-syncing apps in particular. Nobody yet competes with Google in any segment to affect apps, but conveniently Google doesn’t care much for apps by definition. Watch, though, as their Android partners start to have a strategy say in the app decisions – apparently tethering apps are first up on the chopping block.)

@DocDoc:

Faith that it will be useful to them sufficiently to justify the price without actually having a use or uses in mind that would justify the price in advance. It seems to fit the fanboy (fanboi?) mind set…I have one use in mind: I want to play “Angry Birds”

It’s highly possible I could be a fanboy. I could also think that the apps on iPad look genuinely useful – like the medical imagery app that recently got FDA approval, or reading articles in Instapaper. Or that GarageBand actually looks fun. Or that I believe (getting back to the ‘ahead of the curve’ thing) that tablet-touch interfaces do represent the future of casual computing, and I want to embrace it.

> It’s highly possible I could be a fanboy. I could also think that the apps on iPad look genuinely useful …

You mention several reasons why you think the iPad could be useful, but you don’t seem committed to any of them — just to the iPad itself. You indeed could be a fanboy.

Don’t get me wrong. I’ve purchased technological items on speculation before because they seem interesting and not because I have anything particular in mind. Sometimes they’ve turned out useful and sometimes not. But I’ve not purchased such items just because they were the next big thing from somewhere I admire, and certainly did not buy them if they were very expensive relative to my financial circumstances. You’d have to be a fanboy to do that.

See this is curious because you know the very obvious response, since you mention it later. Best Buy can also prevent you from buying a Mac, but that doesn’t mean you can’t buy a Mac. Apple controls the only channel to iPhone (short of rooting.)

Interesting moniker. Is that from Apple’s superbowl commercial, or from where they’re trying to take us?

This is a race to provide users with capability…

Or not. What if i want my pr0n app?

, not a phony WWF death match.

You’re right. WWE’s annual revenues are only about $400M. This, OTOH, is much more serious stuff.

Both Google and Apple can try out new things and then tweak / copy / enhance / re-invent.

As can a lot of other players. More on that anon.

Apple is in a position of profiting wildly from its 2007 disrupter and is building nicely on its 2010 innovation as well as having out-grown the industry for 7+ years with its 1980?s gizmo. In the last couple of years it has gone from nowhere to the leading phone manufacturer (by revenues).

Absolutely.

And because some Wall Street types see Apple‘s success as narrowly based on 2 or 3 home runs in its recent at-bats, they’re dubious enough about giving Apple stock any more than the valuation you’d give a no-growth railroad company (Gene Munster’s words).

Or in other words, the street’s memory isn’t always that short, although in your opinion, in this case, they’re remembering the wrong things.

Google likewise had a blockbuster innovation in search that they’ve turned into a bankable product, but Android is, by their admission, more a tiger by the tail — a defensive move to keep from getting cut out of mobile users‘ ad revenues.

Sure, to the extent that they can’t figure out how to make money in mobile, it’s just a defensive move. From that perspective, Google doesn’t need or even care to win. OTOH, this also directly contradicts your “not a phony WWF death match” claim. Google needs to make sure that, if Android doesn’t “win”, it’s because of a diverse mobile marketplace, and not simply because Apple managed to collect all the marbles and set up a tollbooth.

They get essentially squat from their giveaway that they wouldn’t have if they had continued to enjoy the sort of favored placement they have always had on iPhones.

Getting to keep market share (especially when you are the big dog, and especially in a rapidly growing market like mobile search), is not “essentially squat” in my book. Many companies would kill for this “essentially squat” and google’s done it on the cheap.

Alas, they would not have; as some Android phones have shown, money-hungry OEMs are quite happy to cut deals with Bing. So Google HAD to do mobile to keep their money-making portals going — a great insight/inspiration by Page, I guess — even though mobile revenues are still a tiny deal to them.

But their costs associated with Android are relatively tiny, too. From a corporate perspective, I think Android has played out much better for them than myriad other projects they have bought or started and then killed. And it’s pretty freaking obvious that mobile will be huge.

And their plan for monetizing Android appears a big secret to even themselves, so in vestors punched down the stock a couple of percent a few minutes after THEIR quarterly call. (For the record: those were the shareholders, often big pension funds or others whose own $millions were at stake, bailing before the analysts could offer up their opinions.)

Just because google doesn’t know how to monetize it yet may not be not a big issue to them. A lot of people were wondering how google was going to monetize search. Look at the initial stock valuations vs. today. Obviously, they succeeded wildly. But what the stock market thinks of either google’s or Apple’s strategies is only a secondary consideration to the point that a lot of us here care about — which is that google and open source together deny Apple’s ability to put a walled garden around the only viable smartphone candidate.

So, two companies, very similar products and very different businesses.

While it appears that the end cellphone products are very similar, those aren’t what google is selling, other than a brief, tiny incursion or two into the market. Google is selling open access to the world, because they think they can profit when more people have that. Apple is selling a walled garden, which certainly appeals to a lot of people, while coincidentally allowing them some huge rent-seeking opportunities. In other words, no, the products aren’t really that similar.

I like to think of Stein’s Law: when something can’t keep going, it won’t.

That applies to Apple in spades. They will have to retreat up the product pyramid (even if just by staying put while it grows down below them), or engage in a brutal price competition, or some in between compromise. What they can no longer do is own the entire market at obscene profit margins. Granted, they can still make obscene profits if they do the right things, because there is no question that Android has helped to grow the overall market much faster than Apple could have done it itself.

But how does it applies to google in this situation? Google gives away a lot of products that don’t directly contribute to the bottom line. Why should a product like Android, that does contribute a bit to the bottom line, and is an excellent defensive maneuver, be at risk?

I think Android will have a very different business model in a year or two,

Based on what theories or evidence? And, from the perspective of denying Apple complete market domination, why do I care? If google stops curating Android properly, cyanogenmod will become the dominant fork that the smaller phone companies just slap on their devices without a second thought.

and I think Apple will likewise have reached out in brand new ways to continue its explosive growth.

Agreed that if Apple has explosive growth in a couple of years, it will be because of having reached out in brand new ways.

When/if someone comes up with a way you can “feel” the individual key – then you’ve got something. I have no idea if that will ever happen.

Yes, I think haptic electronics are in their infancy. Still, to me it is obvious this is the future, just like it was obvious in the mid-80s that touchscreens were the future. Surfaces will be able to shape-shift and display shift.

Purely anecdotal – but my observation is people buy Android phones with a keyboard because they switched from BB and are used to it. Then they don’t use them because the touch screen is good enough.

But as the article I quoted shows — some people are in serious bliss when they go back to a keyboard. In other words, better haptics really will have a bright future, once invented.

Well there are two approaches. Once is an actual physical shape change in the touch screen. This sounds expensive and breakable. The other way is some sort of electronic way to make you “feel” it, unclear to me how that would work. It’s a tough problem.

Other cool ideas: Apple is supposedly working on a display that would be both e-ink and color. An idea I’d like to see is that the screen unlocks based on your fingerprint or eye/face scan instead of having to type in unlock codes or use a code gesture.

@Patrick Maupin “Agreed that if Apple has explosive growth in a couple of years, it will be because of having reached out in brand new ways.”

I think Apple will go to a true 2 model approach. Cheap model to maintain or gain market share with lower margins and continue the current high end/high margin model. This will continue the growth (I would call their current growth “explosive”). They’ve half-assed this approach with continuing the old version at a lower cost, but I think a better approach would be two have more of a differentiation like they did when they introduced the iPod mini/nano to complement the standard iPod way back when.

Well there are two approaches. Once is an actual physical shape change in the touch screen. This sounds expensive and breakable.

A million clear light tubes that contract when a charge is introduced. Or something. Somewhat breakable, yes. Not expensive in volume, and when that happens, these people go completely out of business.

The other way is some sort of electronic way to make you “feel” it, unclear to me how that would work.

Somebody might have a physiological insight that makes this more viable, but right now, I’d be inclined to believe more in our ability to create a display which has a shape that alters physically, somehow.

Apple is supposedly working on a display that would be both e-ink and color.

Yes, that’s another obvious target for innovation. The OLPC / Pixel Qi screen is a small step in that direction.

An idea I’d like to see is that the screen unlocks based on your fingerprint or eye/face scan instead of having to type in unlock codes or use a code gesture.

See this is curious because you know the very obvious response, since you mention it later. Best Buy can also prevent you from buying a Mac, but that doesn’t mean you can’t buy a Mac. Apple controls the only channel to iPhone (short of rooting.)

That depends. The counterargument does indeed seem to be “At least with Android you can sideload apps even if Google doesn’t have them. If Apple disagrees, you’re not getting that app.”

As a side-note, when Google exercises remote control over apps, can they even remove apps the user side-loaded? I’m curious.

(That is, suppose I intentionally went hunting for some of those bad spam/trojan apps that Google forcibly removed from phones a few months ago. Can they remove them from my phone even if I sideload them and bypass the market?)

The counterargument does indeed seem to be “At least with Android you can sideload apps even if Google doesn’t have them. If Apple disagrees, you’re not getting that app.”

This is the main reason I don’t want an iPad, and will be keeping my eye out for good deals on Android tablets. I refuse to be restricted to only using Apple-approved apps, even if they approve damn near everyone who applies eventually.

If the only way I can load an app is if it’s part of an approved repository, I’m not using your OS. Hell, I want to be able to write my own apps, or take an existing open-source app and modify it to meet my needs. I accept that doing so means my machine may do strange things, up to and including letting the Magic Smoke out, ruining it forever. I’m a grown-ass man; that’s the price I’m willing to pay for my freedom.

I do appreciate that some people want a locked down, guaranteed safe device. The app stores/repositories serve a very valuable function by vetting apps for these people. I totally grok how corporate IT needs this kind of control over company computing assets. But even they often want the ability to set up their own in-house repositories, where their staff can bless those apps they have tested and found measure up to their standards. That way they aren’t completely dependent on a single vendor to sign off on what may turn out to be mission-critical software.

I do appreciate that some people want a locked down, guaranteed safe device. The app stores/repositories serve a very valuable function by vetting apps for these people. I totally grok how corporate IT needs this kind of control over company computing assets. But even they often want the ability to set up their own in-house repositories, where their staff can bless those apps they have tested and found measure up to their standards. That way they aren’t completely dependent on a single vendor to sign off on what may turn out to be mission-critical software.

Oh, and I think Monster’s choice is completely rational. I can imagine making it myself. It happens to be the case that I don’t want a locked down, guaranteed safe device but the advantages of iOS are sufficient to overcome my resistance right now. I think about it seriously every time I buy a new tablet/phone, which is about yearly. More often when someone, whether it’s Apple or Google, screws up privacy.

the advantages of iOS are sufficient to overcome my resistance right now

For me, the key advantage of iOS is that I can write my apps in Objective-C. Android, WebOS and WP7 are all non-starters as far as I’m concerned until and unless one of them offers an Obj-C or Smalltalk development system. I’ll never go back to C++, and Java and C# are both close enough to C++ to be highly irritating.

WebOS and WP7 are all non-starters as far as I’m concerned until and unless one of them offers an Obj-C or Smalltalk development system.

I think Smalltalk would probably be doable as a language that could be translated to Dalvik. I like Smalltalk’s OOP paradigm, but I think other languages implement it better than Objective C. It’s too bad Object Pascal never gained very much momentum outside of the small Delphi community. I partly blame Apple’s decision to drop support for it when they switched from 68K Macs to PPC Macs and partly Microsoft’s push to make C++ the “standard” development language on Windows.

I’ll never go back to C++, and Java and C# are both close enough to C++ to be highly irritating.

Java shares only of C++’s syntax, but I find that its object system isn’t nearly as complicated.

But if you develop an enterprise app that you want to distribute only to your employees, the app must be digitally signed with a certificate issued by Apple through the Developer Enterprise Program.

You’re still dependent on Apple signing off on your certificate. That is an unacceptable limitiation.

If I can’t put my own self-generated public key into the trusted signers list on the tablets I own, then I don’t really own them. And if I won’t own them, I won’t buy them. Maybe I’ll lease them instead, since that’s a more honest description of the transaction.

Sure, to you. And I get why it’s unacceptable to you, and I think you’re being perfectly reasonable.

But I’m not saying that you should be happy with what Apple provides you. I’m saying you were mistaken when you asserted that “even they [corporate IT departments] often want the ability to set up their own in-house repositories, where their staff can bless those apps they have tested and found measure up to their standards.” You need to have $299 and a DUNS number and you’re good to go. Apple doesn’t vet individual enterprise apps in this scenario, and they don’t vet businesses beyond requiring a DUNS number.

Other things that require a DUNS number: being invoiced monthly for Google AdWords buys. Getting a line of business credit. Signing Windows binaries. I think it would be very hard to demonstrate that corporate IT would consider this limitation unacceptable.

Do certificates ever expire? Even if they don’t now, is there any legal protection against a future iOS update invalidating older certificates? It’s not the $299/year I’m objecting to so much as the fact that Apple can, for whatever reason, come up with a reason to add new criteria (or simply reject an application and provide no reason for doing so).

What if Apple discontinues its program, and you can’t get a new certificate?

Any system that makes Apple the root authority puts your mission-critical apps where an outside party can render them inoperative. And saying “Microsoft does it too” doesn’t make it any better. Whether corporate IT thinks it’s OK to expose themselves to this risk is a measure of how well they understand the risk, not of the severity of the risk.

It’s the difference between a right and a privilege. If something is truly your right, you don’t need a license to do it. Licenses are for privileges. The ability to be your own root authority makes all the difference in the world.

For me, the key advantage of iOS is that I can write my apps in Objective-C. Android, WebOS and WP7 are all non-starters as far as I’m concerned until and unless one of them offers an Obj-C or Smalltalk development system. I’ll never go back to C++, and Java and C# are both close enough to C++ to be highly irritating.

Will Mirah do? Mirah is a Ruby-like syntax for Java semantics. It compiles straightforwardly to Java source or .class files, and relies on no runtime above and beyond Java’s. It’s really quite nifty.

There is a package called Pindah which lets you build Android apps in Mirah. Both are available as gems for JRuby.

Authoring Android apps is also possible in other JVM-based languages, such as Ruby (Ruboto) and even Scheme (Kawa).

I guess Apple must be paying this guy to try to convince Samsung and HTC to commit suicide.

I think he believes what he’s saying. Not that I agree with his analysis, especially since he doesn’t show his work. Instead, he just makes the blanket statement that Apple is beating the crap out of other tablet vendors because Apple manages the whole ecosystem. I think he and Jeff Read have been drinking the same Kool Aid.

See, if that were true, then Apple would be beating the crap out of their competitors in the smartphone space, and that’s not the case.

See, if that were true, then Apple would be beating the crap out of their competitors in the smartphone space, and that’s not the case.

Well, as with PCs, Apple’s apparently sucking most of the profit out of the market, so in that sense they are (currently) winning, and if they execute well, can probably continue to win on the profit metric. But the suggestion that other companies in the same space can do well by emulating Apple seems completely untenable at this point in time. Mind you, we may find out the viability of the strategy, simply by following HP and NoWin.

I think the reason we haven’t seem big Android tablet sales yet is that product offerings we’ve seen so far suck pretty badly on the hardware side – overpriced, underpowered, flimsy, or two or three of those at once. That will change rapidly as the SoC-based systems begin shipping.

Of course that’s a benefit, but Apple is designing their own mobile CPUs and has the advantage of tight hardware/software integration, so won’t iPads get better at the same time? Maybe Android tablets will get better faster, starting from further behind, but Apple is still seems ahead way here and is a fast-moving target.

I did see Pandigital 7″ Android tablets at Bed Bath and Beyond yesterday, and asked the clerk about them. He said they’d sold a lot of them and hadn’t had any returns that he knew of.

I believe that Apple has an architecture license (which allows them to do design). They also have several of the key people from PA Semi, which had several of the key people from the DEC StrongArm development team, who had done Alpha stuff before, and did a great job (for its time) on StrongArm, also with an architecture license. Apple is also integrating Intrinsity, which knows how to speed things up.

I could be wrong, but I don’t think Broadcom (which only recently started doing ARM at all seriously — they’ve mostly been a MIPS house) has an architecture license. This means that Broadcom can’t change the RTL.

The difference is as if you gave somebody a C library and some testbenches. For one price, you let your customer compile the C library and link it to his code, but he has to make sure the test benches run fine, and he is not allowed to modify your C code. But if he gives you some more money, then you give him the right to modify the C code so that it compiles better, etc. But he still has to run the test benches, I think.

Jeez, relax, Morgan. The Wikipedia entries for the A4 and A5 says they are “designed by Apple.” Is that untrue? Apple also designs their iPods and Macs etc. without designing and building every little component. Is anybody else using that exact same system-on-a-chip (SoC) package-on-package? If so, I’ll grant your point. But if the whole thing is unique to Apple, then I think it’s fair for me to say they are “designing their own.”

>Of course that’s a benefit, but Apple is designing their own mobile CPUs and has the advantage of tight hardware/software integration, so won’t iPads get better at the same time?

They will. The question, though, is whether the actual performance demand of users is exactly at where Apple has positioned the iPad or somewhere below it. If it’s below, Android tablets will disrupt iPads even though iPads continue to improve.

Even if apple builds their own CPUs they will not necessarily be very competitive. It will enable tighter software/hardware integration but that is about it. The amount of ways IC designers can use to improve such key specs as “power consumption” has infinite more degrees of freedom than what can be achieved through tight software/hardware integration, or for that matter abolishing multi-tasking all together.

Circuit innovations, semiconductor innovations etc make this space well beyond the grasp of Apple.

Would you also claim that AMD isn’t “designing” their CPUs because they have an x86 license, or that Motorola didn’t “design” their PPC parts because they license the POWER architecture from IBM?

Apple has a better pool of chip design talent now than Sun did when they developed the SPARC line. They’ve got the PA Semi team, including the lead designer of the DEC Alpha, as well as veterans from MIPS and Transmeta.

They farmed out the A1 to Samsung, and decided that they couldn’t get what they needed from outside design vendors.

Incidentally, I wouldn’t be surprised to see a lower-end MacBook Air based on an ARM CPU within a year or so. It may or may not be extended to 64 bits. The key selling point would be much better battery life than they can get with any x86 part.

> Apple has a better pool of chip design talent now than Sun did when they developed the SPARC line. They’ve got the PA Semi team, including the lead designer of the DEC Alpha, as well as veterans from MIPS and Transmeta.

That expertise is only limited to architecture/instruction set/digital design? Assuming those people are indeed the industry’s best architects (far from true) what exactly is apple’s expertise in SoC. Have they developed any SoC’s before? Have they ever managed to put any analog on the same die as the digital CPU core ? Do you understand what an SoC is ?

Why, yes! I do know what an SoC is, and i also know when someone’s being a pedantic jerk.

Apple has been designing the SoCs for their iOS devices since the A2 chip. Before that, they designed their own northbridge and southbridge parts for the PPC machines. Looking way back, they designed a rather famous disk controller part, known as the “IWM” (integrated Woz machine).

Chill. They needed to do stuff like the Integrated Woz Machine back in the day because floppy disk controllers were very expensive. These days, disk controllers are so cheap they’re built into the motherboard for free. uma has a point there. You do stuff like a SoC mostly in order to save on power requirements, size and manufacturing costs, not to necessarily to do “tighter hardware/software integration.” Sure they might get that, but even looking back at the IWM — Woz did that to save money and chips. It was a cool hack, for sure, but anyone who knows anything about disk controller design also knows that it was a big compromise that sacrificed disk capacity and performance for cost. And that’s what Apple’s A4 and A5 are — they are more about saving money than an effort to develop something cool.

> That expertise is only limited to architecture/instruction set/digital design? Assuming those people are indeed the industry’s best architects (far from true) what exactly is apple’s expertise in SoC.

You are absolutely certain they’re not good architects, but then you admit you don’t know anything about them. Hmmm.

I don’t know the exact makeup of Apple’s current team, but I can tell you from firsthand and secondhand knowledge of some of the people at both Intrinsity and Digital Semiconductor that they have good architects and designers, and in fact people who understand implementation quite well. I worked in the same small office with the Austin portion of the StrongARM team back in 95 and 96. Those people had worked at DEC, then came to Austin to work on PowerPC stuff with Apple and IBM, and then they went back to DEC but stayed in Austin. (When DEC offered me a job, I said “well, it sounds interesting, but I’m not leaving Austin” and they said “we’ve got an office down there with people who said the same thing.”) And I worked with some of the Intrinsity folks, and know others by reputation, from my time at AMD. I also worked with at least one person at Sigmatel who later left for Apple. And, of course, as Some Guy points out, Apple has been doing in-house chip integration work for a long time.

In short, there are a lot of very successful boutique fabless semiconductors with less talent than Apple has collected, and I have no doubt that Apple has what it takes to build SOCs to do what they want. They are in a great position to make vertical integration work and give themselves a softer landing on margins, simply because of the sheer volume of their end product business. This is one of the reasons that I think that they stand a chance of successfully retreating upward and hanging on to a lot of the high end business.

You do stuff like a SoC mostly in order to save on power requirements, size and manufacturing costs, not to necessarily to do “tighter hardware/software integration.”

It was uma, not Some Guy, who said the purpose was to do tighter software/hardware integration, a couple of posts before he intimated that Apple couldn’t possibly do any useful chip design.

And that’s what Apple’s A4 and A5 are — they are more about saving money than an effort to develop something cool.

You mention saving on power requirements, and then promptly seem to discount it. Given where we are, and where we’re going, this may just be the major enabler of “cool” in the handheld world for the next generation of products. And Apple, with their iPod background, is actually well-positioned to play in this war. PMPs have “on-time” requirements that rival dumbphone “standby-time” requirements.

And Apple, with their iPod background, is actually well-positioned to play in this war. PMPs have “on-time” requirements that rival dumbphone “standby-time” requirements.

That’s mainly because they don’t have power hungry cellular radios. Use your phone to talk for 30 minutes and notice the temperature difference afterwards — the phone gets a lot warmer. This has a lot less to do with the fact that you’re holding it to your ear than you might think.

>You are absolutely certain they’re not good architects, but then you admit you don’t know anything about them. Hmmm.

Read my posts again. I don’t think I said that I am “absolutely certain” that they are not good architects. What I said is that they have virtually no expertise in SoCs. I

Why do think the Nokia dumb phones that used to cost $200 now cost $10 or $20. It is because of SoCs which integrate not only the CPU but also virtually all analog functionality (including power management functions) on the same silicon die.

SoCs will rule. SoCs involve the integration of analog and digital on the same silicon die. I don’t care how good of a CPU architects they have. The CPU is only one small aspect of doing SoCs and the challenge of Integrating analog and digital (e.g. an RF transceiver and a CPU) on the same die is far from being trivial. Even intel failed in that game and ended up selling their processor unit to Marvel because they could not effectively integrate competitive analog in their SoCs.

Once SoCs start to rule in the tablet space (which they will) Apple is simply out of the game. I would bet my money on braodcom (vs apple) any time of the day in the SoC game.

My expectation is that SoCs will hurt apple particularly badly in the smartphone segment. Phones are particularly sensitive to the form factor of the ICs that sit on the PCB. Single chip solutions (SoCs) matter and matter a great deal in this price sensitive market.

> In short, there are a lot of very successful boutique fabless semiconductors with less talent than Apple has collected, and I have no doubt that Apple has what it takes to build SOCs to do what they want

Nonsense. What is the analog SoC talent that apple has collected ? It’s non existent.

Apple’s acquisition is only relavent in CPU design, which in my estimation is less 30% of challenge of building the kind SoCs that broadcom has been cranking out and commoditizing entire market spaces with.

I said “requirements”, not “capabilities,” as in, in the early days of dumbphones, people just put them on the charger overnight every night, but there’s no way the PMP market would have taken off with this sort of burden on the user.

@uma:

assuming those people are indeed the industry’s best architects (far from true) what exactly is apple’s expertise in SoC.

You are absolutely certain they’re not good architects, but then you admit you don’t know anything about them. Hmmm.

Read my posts again. I don’t think I said that I am “absolutely certain” that they are not good architects.

No, you just said it was “far from true” that they have the “industry’s best architects.” This implies that you know them. But that statement was right after “That expertise is only limited to architecture/instruction set/digital design?” which, as it’s a question, indicates that you don’t seem to think you know much about them…

What I said is that they have virtually no expertise in SoCs.

Right. There you did it again.

SoCs will rule. SoCs involve the integration of analog and digital on the same silicon die. I don’t care how good of a CPU architects they have. The CPU is only one small aspect of doing SoCs and the challenge of Integrating analog and digital (e.g. an RF transceiver and a CPU) on the same die is far from being trivial.

There is no doubt that properly applied integration gives a lot of leverage (and premature integration is a particularly pernicious form of premature optimization), but I think that (a) Apple is up to the challenge to design what they need; and (b) nothing says that the entire system has to be on a single chip. In fact, as we ratchet down the geometry and packaging curve, sometimes it is cheaper to have stuff in separate chips, and sometimes all in one chip. SOC is usually a bit of a misnomer. In all but the most simplistic systems, there are separate chips for RAM and Flash, for example. And if you have a process that is optimized for bleeding edge digital, it won’t be very analog friendly at all. It wouldn’t be at all surprising to see a lower-density process used for a separate chip that has some analog and some digital, or to see the UI processor and analog front end on a separate chip than the RF processor and analog front end.

Even intel failed in that game and ended up selling their processor unit to Marvel because they could not effectively integrate competitive analog in their SoCs.

That’s for Intel’s definition of “failed.” IIRC, they were just making normal-sized profits in that market because of competition, as opposed to the ginormous profits they make in markets they own. It seems like a tremendous strategic mistake in hindsight, mitigated by the fact they still have an ARM license if they need it, and they still have lots of analog IP (that was working fine IIRC), and they have fabs and wads of cash in the bank.

Once SoCs start to rule in the tablet space (which they will) Apple is simply out of the game. I would bet my money on braodcom (vs apple) any time of the day in the SoC game.

If Apple can make an SOC that does exactly what they need, at a price that’s a lot cheaper than Broadcom would sell them one, then it was worth it to them to build it.

My expectation is that SoCs will hurt apple particularly badly in the smartphone segment. Phones are particularly sensitive to the form factor of the ICs that sit on the PCB. Single chip solutions (SoCs) matter and matter a great deal in this price sensitive market.

I don’t for a minute think that Apple having in-house SOC capability will stop the Android juggernaut. OTOH, Apple does in fact succeed in its game by vertical integration, and they are very good at it, and they have good systems architects and at the end of the day, Apple probably won’t be playing down in the mud on price, just like they aren’t today. If Apple thinks that building their own SOC is the right thing for them to do, I’m not going to second-guess that, and I’m certainly not going to accept second-guessing from someone who thinks it’s impossible for Apple to build a viable SOC without giving anything approaching lucid reasoning to back the opinion up.

Nonsense. What is the analog SoC talent that apple has collected ? It’s non existent.

I don’t know who they are, but I know that they have collected enough high-level chip system design talent to figure out what and who they need, and go and make it happen. If they can’t do it now, I chalk it up solely to a management problem (as in not listening to what the chip guys say they need), and that seems rather unlikely at the moment as well.

> No, you just said it was “far from true” that they have the “industry’s best architects.” This implies that you know them. But that statement was right after “That expertise is only limited to architecture/instruction set/digital design?” which, as it’s a question, indicates that you don’t seem to think you know much about them…

“Far from true” is indeed my judgement. I don’t have to know the people in person to make that statement. For them to be industry’s best architects we have to see their pioneering work in action, whether in the past or present. In addition to CPUs we have to see real SoCs which integrate the CPU alongside other functions.

“Far from true” is also different from “Absolutely certain”. However, the SoC community is relatively small. And if apple had an significant (let alone industry-leading) SoC talent in that area I would have known about that already.

Once again, It’s my judgement. It’s well informed. I am willing to change my opinion if I see pioneering work. Thus far it is all fluff, and marketing BS. The A4 is another ARM. There is a saying we have in the part of the world where I am originally from. It goes like this: “The lioness has roared and roared as she went into labor only for her to beget a little mouse”. The A4 is like our lioness friend which went into labor. It is another ARM.

Last, CPU is only component of the all too important and differentiating battery lifetime spec. You don’t have to have the most optimized CPU architecture to produce the most competitive solution from battery power point of view. Much of power wasted in tablets is in the display rather than the CPU.

> For them to be industry’s best architects we have to see their pioneering work in action, whether in the past or present.

Well, that’s how open source works, but it’s not necessarily how industry works. In any case, you don’t think that DEC Alpha or the StrongARM processor contained any pioneering work?

> In addition to CPUs we have to see real SoCs which integrate the CPU alongside other functions.

Yes, but these days you can often do a “real SOC” by just having a couple of good analog guys, along with a bunch of bought IP. The free market is alive and well in both analog and digital IP. Some of the radio front-ends are probably a different story. As I mentioned earlier, it would not surprise me at all if Apple built some, but not all, of the functions they need and bought others. They don’t need to put the entire system on a single die (and it may well be inadvisable to do so) in order to create and usefully use what people call an “SOC.”

> However, the SoC community is relatively small.

It’s much bigger than you might think. I’m a guy you’ve never heard of, working for a company you’ve never heard of, and we ship millions of SOCs a year.

Where are their SoCs ? Can you show me a chip that apple makes that integrates a) CPU functions b) baseband functions c) Analog, power and RF functions on the very same silicon die ? These kind of chips exist in the commoditized dumb phone market. Mostly made by broadcom, qualcom, infineon and others.

Do you have any conception how many years it takes to carefully nurture and assemble the kind of talent it takes to integrated RF analog functions on the exact same silicon die with 10s of millions logic gates flapping at near GHz frequencies ?

@Patrick Maupin
> Yes, but these days you can often do a “real SOC” by just having a couple of good analog guys, along with a bunch of bought IP. The free market is alive and well in both analog and digital IP

Man. you made me laugh! A couple of analog guys and buying IP from the analog market. If that is indeed the case, how come that intel (which has infinite more expertise in ICs design and manufacturing) could not manage to pull that one off and was totally driven out of that market ?

Where are their SoCs ? Can you show me a chip that apple makes that integrates a) CPU functions b) baseband functions c) Analog, power and RF functions on the very same silicon die ? These kind of chips exist in the commoditized dumb phone market. Mostly made by broadcom, qualcom, infineon and others.

Ahh, so it’s not an SOC unless it’s the entire system? Except, of course RAM. And flash. And, since you said baseband, presumably the mixer and the power amplifier and maybe an LNA.

Mostly made by broadcom, qualcom, infineon and others.

Perhaps, instead of asking rhetorical questions like “Do you know what an SOC is?” you should have gone ahead and put forth your personal definition of SOC. Yes, the holy grail is a single-chip cellphone, but no, it doesn’t have to all fit in a single chip for one or more of the components to be considered an SOC, which is a good thing, because you can’t show me a true single chip smartphone of the iPhone caliber in any case.

how come that intel (which has infinite more expertise in ICs design and manufacturing) could not manage to pull that one off and was totally driven out of that market ?

I explained that intel wasn’t making the ginormous profits they are used to. That doesn’t mean they were “driven from the market” but of course, you can go ahead and believe that if you want. Marvell was already making ARM cores, but seemed quite happy to accept the business from Intel, and they’re competing very aggressively with a lot of different SOCs.

> In any case, you don’t think that DEC Alpha or the StrongARM processor contained any pioneering work?

– Not pioneering enough to have driven inferior intel and x86 companies out of the market ! Instead, it was DEC that died! Micro$oft NT was running on the DEC alpha. Wasn’t it? You cannot blame that on teh WinTel monopoly.
– Not as pioneering as say “cellular processor”
– Not as pioneering as the ARM instruction set itself.
– Not as pioneering as multicores like Tilera
– Not as pioneering as cellular automata, or quantum computing.
– Not as pioneering as the memristor work that has come out of HP in the last couple of years.

List goes on!

The idea that apple is “innovating” more than others is the most ludicrous idea to anyone who knows anything about the history of technology. The fact of that matter is that such corporate beauracracies such IBM have produced far more innovations that benefit mankind in the last 30 years than apple (with its “innovative culture”) has.

> I explained that intel wasn’t making the ginormous profits they are used to. That doesn’t mean they were “driven from the market” but of course, you can go ahead and believe that if you want

They were absolutely driven out of that market. Now they are trying to come back because they realize that the future is SoC and that ARM is a disruptive technology which will sooner or later eat their lunch.

They simply failed to deliver and they were no where near as competitive as the others neither on performance, nor on analog SoC integration, nor on power consumption.

You made the assertion that a couple of analog guys and apple will pull it off. That was your assertion.

Uma, I think it’s odd to argue that somehow Broadcom (market cap: $18.87 billion) can do all sorts of things that Apple (cash on hand: $29.23 billion) will somehow be unable to do. It seems to me Apple has many ways of gaining any needed expertise, up to and including just buying Broadcom. Three years ago Apple had no expertise in phones or tablets, and look where they are now.

> Three years ago Apple had no expertise in phones or tablets, and look where they are now.

Building a phone out of standard components is a far more trivial challenge than building mixed signal ICs

> It seems to me Apple has many ways of gaining any needed expertise, up to and including just buying Broadcom.

They could. THe benefits would still be limited to apple. It will easily take 3 or 4 years to reallign the resources there to fit apple’s business model and to start producing useful stuff for Apple. During that time, the market will have shifted already. Broadcom is not the only player there. And 3 to 4 years is a very very very long time.

It’s not in Apple’s interest to get into the IC business. Maybe work with partners there to customize ICs to fit apple’s needs. I’d buy that. But getting into the IC business is the wrong move and it won’t pay off. And no matter what they do they won’t be able to stop the commoditazation of smartphones and tablets and prevent that from eating up their market from below. They have to keep coming up with new gadgets each of which would open up a $20B or $30B market for them. Can they do that ?

In any case, you don’t think that DEC Alpha or the StrongARM processor contained any pioneering work?

– Not pioneering enough to have driven inferior intel and x86 companies out of the market ! Instead, it was DEC that died! Micro$oft NT was running on the DEC alpha. Wasn’t it? You cannot blame that on teh WinTel monopoly.
– Not as pioneering as say “cellular processor”
– Not as pioneering as the ARM instruction set itself.
– Not as pioneering as multicores like Tilera
– Not as pioneering as cellular automata, or quantum computing.
– Not as pioneering as the memristor work that has come out of HP in the last couple of years.

Well, I take exception with the ARM instruction set in this list. But whatever. In your meanderings, you are conflating simple technical competence with being the first to do something, and with doing something actually brilliant, and also with making serious money. These four items don’t all always go together, by any stretch of the imagination.

The idea that apple is “innovating” more than others is the most ludicrous idea to anyone who knows anything about the history of technology.

Umm, can you point to where I said that? (Hint: you can ask anybody here, and they will tell you that I don’t think Apple is that special in terms of innovation. But I do think that they do marketing and engineering well, and btw, once they know what they want to build, what they need to do in the SOC is mostly straightforward engineering.)

You made the assertion that a couple of analog guys and apple will pull it off. That was your assertion.

I said that a viable SOC can be made with just a couple of analog guys and some preexisting technology, and I have personally seen this happen multiple times, with chips that sell millions of units a year. This is true for some definition of analog guys and for some markets. When you own a captive market like Apple and you’re going to buy the baseband processor that the customer can’t touch and provide a separate UI processor, this could certainly be more than enough. Later, if they want to try to roll it all into a single chip, they can beef up the team and try for that. There are a lot more talented IP companies out there than you probably realize.

The reason that big companies like Broadcom, et al, can make more complicated SOCs than some other companies is a combination of management and the will to put in the time and money investment, that is all. Apple is in a position to make SOCs. As complicated as the ones you make? I don’t know. As complicated as they need and want them to be? Almost certainly.

You probably don’t want to hear this, but the technical competence of the analog designers in the trenches is usually not what makes chip companies sink or swim, and there are lots of entirely competent analog designers all over the world.

It’s not in Apple’s interest to get into the IC business. Maybe work with partners there to customize ICs to fit apple’s needs. I’d buy that. But getting into the IC business is the wrong move and it won’t pay off. And no matter what they do they won’t be able to stop the commoditazation of smartphones and tablets and prevent that from eating up their market from below. They have to keep coming up with new gadgets each of which would open up a $20B or $30B market for them. Can they do that ?

See, this, I can actually find believable. I find it entirely believable that Apple can create whatever they want in the form of an SoC, but also believable that it’s the wrong thing for them to do. OTOH, that really depends on if they have something special they are planning (probably on the processor side) that nobody else is doing — which could happen with people like Intrinsity.

To the extent I think that Apple is screwing up by developing IC skills, I think it has to do with the fact that they’ve been getting screwed, because Intel-sized chip prices, even with the large customer discount, give lots of margin to Intel.

Cellphones are a different market, and the players in the commodity semiconductor market live on much smaller margins than Intel typically has.

Which is one reason I find it interesting that Apple is apparently turning to Intel to fab chips for it. I would think this is driven by short term business reasons on both sides (Samsung lawsuit, new empty fab, etc.) but what do I know?

SoCs don’t have to have the “entire” system. They have to have a sufficient level of integration to really affect price points and BOM. The type of SoCs that apple needs cannot be done by 2 people, 20 people or even 200.

The other important thing when it comes to SoCs is to note that integration often not only helps price points come down but also helps gain performance (speed, power etc). They are pretty much a “win” every which which you look at them.

>SoCs don’t have to have the “entire” system. They have to have a sufficient level of integration to really affect price points and BOM.

I agree.

Furthermore, this is a place where having lost the market-share lead hurts Apple badly. Lower volume means it will be more difficult for them to amortize out the high design cost of a SoC. Even if Apple decides it wants to follow Android down the price curve, it’s going to be harder for them to actually do it.

SoCs don’t have to have the “entire” system. They have to have a sufficient level of integration to really affect price points and BOM.

Sure. But I think it’s entirely plausible that with the volumes they will be able to drive (even at 10% of the handset market) that they will be able to justify an in-house development team.

The type of SoCs that apple needs cannot be done by 2 people, 20 people or even 200.

How do you know what Apple needs? Perhaps they’re intent on buying the baseband, and just building a UI processor (including a bit of analog like the touch screen interface and audio). That could easily be done with a team of 20 people including 2 good analog guys.

It is quite likely that in the merchant semiconductor market, for higher end smartphones, there will be a baseband/UI processor split for awhile. The baseband processor is, at some point, “done” and the volume driver will be for one that can communicate with several different performance levels of UI processors.

The other important thing when it comes to SoCs is to note that integration often not only helps price points come down but also helps gain performance (speed, power etc). They are pretty much a “win” every which which you look at them.

There are several tradeoffs involved, and it depends on the current state of packaging technology and costs vs silicon technology and costs. If you have a low-bandwidth interface, it is not necessarily a win to package the two parts on either side of that interface together. If you have a relatively high voltage block, it can be a terrible compromise to put it in the same chip with a lot of logic, where you have to increase oxide thickness. Once you decide to separate some blocks into separate die, correct partitioning is key, and depends on changing variables. We have some parts we used to have in MCMs, then went to discrete packages, then back to MCMs.

The other thing that happens with more integration is that your yield goes down. Depending on defect density, it could go down a lot. So there are a lot of tradeoffs in deciding exactly what to put into your SOC, and in Apple’s case, some of the parameters include what they can buy easily on the market from Marvell, Broadcom, Qualcomm, whoever.

But the optimization goals are quite a bit different when you are a merchant semiconductor house intent on capturing most of the BOM of several different customers with a single solution that may be overbuilt for any one particular customer, than when you are building a product that contains a lot of bought silicon (RAM, ROM, baseband, etc.) and simply building some silicon to optimize your total price/performance for the whole device.

Lower volume means it will be more difficult for them to amortize out the high design cost of a SoC. Even if Apple decides it wants to follow Android down the price curve, it’s going to be harder for them to actually do it.

Actually, at Apple’s volumes, the costs are probably neutral or weigh in favor of doing a UI processor in-house. And with Apple’s fairly regular release cycles, they can keep the team quite busy, and should never really fall any further behind the bleeding edge than they already are, simply by dint of their natural need to do a lot more QA than the average Android house and to have millions of units ready to ship at product announce.

The whole reason they are doing silicon in-house is probably because, at some point, Jobs was frustrated by schedule delays and quality issues with one of his suppliers. Expect in-house silicon design at Apple to last exactly as long as Jobs or his successor is happy with internal performance and quality. Price should essentially be a non-issue unless their shipment unit volumes (not market share) erodes significantly.

> Three years ago Apple had no expertise in phones or tablets, and look where they are now.

You’re off by several years. Apple was working on the phones and tablets for a long time before they hit the market. When I was working there, several friends of mine “went dark” around 2003, and I didn’t know what they were doing until SJ asked them to stand up at the iPhone intro.

Apple doesn’t just have “a couple of analog guys”. They’ve been cherry-picking engineers from all over the semiconductor and cell phone industries for about a decade now. Buying PA Semi and Intrinsity was a bit unusual for them; ordinarily they would have just hired the top four or five people they wanted from each company.

Lower volume means it will be more difficult for them to amortize out the high design cost of a SoC. Even if Apple decides it wants to follow Android down the price curve, it’s going to be harder for them to actually do it.

Wait a minute. I believe you’ve been claiming that Android is going to win in part by virtue of many different companies producing a large variety of Android models, and but now you claim that lower volume prevents Apple from amortizing the cost of a SoC. Apple sells one iPhone and one iPad (not counting minor variations and refurbs of old models), and does so by the tens or even scores of millions. When one Android maker sells that many of one model, or many Android models all using the same SoC sell in the scores of millions, you might have a point. But I think Apple’s high volumes and limited model range makes amortization much easier for them than for any Android maker. Unless I’m missing something.

You’re off by several years.

I meant “proven in the market expertise,” not secret laboratory expertise. Of course they worked on this in secret for years: in fact the iPhone is known to have been a spin-off of iPad research.

>Wait a minute. I believe you’ve been claiming that Android is going to win in part by virtue of many different companies producing a large variety of Android models, and but now you claim that lower volume prevents Apple from amortizing the cost of a SoC.

That’s correct. In this context it’s the aggregate volume of all Android-army members that has to be compated to Apples, since it’s the aggregate demand that will drive production volume in the fabs.

Really? I would think that one customer would get a better price per unit on one order of 10 million compared to 20 different customers each ordering 500,000 units. Certainly the fabs would see some economies of scale, and the customers would get some of that, but I doubt that all of those savings would be passed on to customers, regardless of order size. Apple is also said to be paying for some components with cash up front, which should get them further discounts.

That’s correct. In this context it’s the aggregate volume of all Android-army members that has to be compated to Apples, since it’s the aggregate demand that will drive production volume in the fabs.

The semiconductor market is kind of complicated, because fabs are very expensive. Sure, TI, Intel, Samsung, etc. have fabs, but a lot of the serious players in the ARM SOC space, such as Broadcom, Marvell, and Qualcomm, are all fabless. They will typically get the silicon fabricated at a pure play foundry such as UMC, TSMC or Chartered, and then get the chips assembled and tested at a company like Amkor or ASE.

While it’s true that they will get good deals at fabs based on volumes, Apple has enough volume to get good pricing too, and enough capital to help work good deals, as well. For example, Apple could buy testers or packaging machines to place at Amkor or ASE that would give them priority for the peak Christmas season. You can even buy or lease dedicated machinery, yet have it situated at these companies and run by their operators. There are lots of ways to structure deals for capacity, and Apple’s cash will be king.

The bottom line is that Apple can deal on a fairly equal, or even advantaged, footing with the same suppliers as any fabless chip company, and will likely have volumes for a particular chip that are of the same order of magnitude as any particular chip that the Broadcoms and Marvells will be producing. Remember, they will produce different chips for different market segments, and at the end of the day, there will probably be over a dozen different firms producing ARM silicon. So the ARM SOC market will drive the price down towards the market price for getting chips fabbed and assembled, but the fabless chip companies need to make some margin to pay their people and pay for mask sets and engineering tools, or they go out of business.

This is why I say that Apple’s strategy could be approximately cost neutral. To the extent that it provides a cost adder, it does so by adding fixed costs (say, $30M – $150M / year) for development, while removing the per-unit margin required if they bought from a Broadcom or Marvell. Certainly, it’s a better deal the more chips they ship, but given the mountain of cash washing over them right now, it’s not really a very big expense in absolute terms in any case.

In terms of how Wall Street thinks, it may actually appear to improve their bottom line. Wall Street puts R&D and gross margin expenses into separate categories, and to the extent Apple has to start dropping prices, recategorizing what would have been gross margin paid to Broadcom into an internal development R&D group could actually look good to the street.

The news that Apple is apparently fabbing at Intel tells me that Intel wasn’t planning for the decline in PC volumes and has some fab overcapacity. But there are enough players in the open fab market that the price will probably be set correctly — it’s hard to imagine Apple being suckered into paying too much for fab, while Intel is possibly looking for just one or two large external customers to better manage its capacity — they don’t want the headaches that come with being willing to fab for every Tom, Dick and Harry startup.

>The news that Apple is apparently fabbing at Intel tells me that Intel wasn’t planning for the decline in PC volumes and has some fab overcapacity.

More like, fabbing A5/6/7 chips for Apple will pay better than whatever else they would have used those lines for. I doubt that Intel has any overcapacity for their smallest-geometry process. They’re spending $5B on a new plant in Arizona for the 14 nanometer process.

It really surprised me how fast Intel became huge Apple fans once the deal was made to switch the Mac to x86. That collaboration is bearing fruit already with Thunderbolt, and I’m looking forward to learning what else they’re working on together.

Intel is one node ahead of the foundries in the scaling game. Scaling down significantly helps the power consumption Spec of their CPU- more critical for phones than tablets. If they can pull it off they will manage to ramp up a CPU which burns less power anywhere from 6 months to a year ahead of competition. That will put them at an advantage.

As for thunderbolt, it may turn out to be a repeat of FireWire. USB3.0 (5Gbps) will most likely prevail just as USB2.0 prevailed over Firewire inspite of USB’s lower throughput.

You did mention “collaboration”. There is no “collaboration”. It actually does not make a lot of sense for intel to help apple produce a CPU which in effect undermines the x86 platform unless they are being paid enormous amounts for it. Apple needs intel far more than intel needs apple on this.

Are they? They are building a 14 nm fab, which may or may not be for Apple stuff. But I thought their current stuff was at 32 nm. TSMC has a 20 nm process right now, and UMC is shipping lots of 28 nm stuff.

Apple needs intel far more than intel needs apple on this.

C’mon. It’s not like Intel refusing to play ball is going to keep Apple from getting competitive chips fabbed somewhere. If there’s profit in it for Intel, they might as well make it. In fact, trying to starve the other fab shops of the business they need to expand may even be the best shot Intel has at slowing ARM until they’re ready with something that can compete. That’s how the free market works.

Anyway, I have two more idle speculations as to why Intel:

1) ARM licensing costs.

I have heard that, these days, ARM charges more for each CPU that you put on a die. Also, they probably wised up, and for someone like Apple who is using a fab, they probably charge some sort of imputed cost based on the fact that the silicon is never directly sold. OTOH, Intel has a very early ARM architecture license they got when they bought Digital Semiconductor, before ARM was that popular, and before CPU silicon ramped so far down Moore’s law cost curve.

So just for the sake of argument, let’s say that Apple is doing a quad-core processor, and ARM would charge them 1% of the silicon cost for the first CPU, and 1/2% for each of the other 3 CPUs, or a total of 2.5%, but they charge double that (5%) if Apple is building a system rather than selling a chip.

Now let’s assume that Intel has a license that lets them do whatever they want for a flat 1%. In that case, if Apple buys $10 worth of silicon from Samsung, they have to pay Apple 50 cents, for a total cost of $10.50, but if they buy $10.50 worth of silicon with an already paid-up ARM license from Intel, Intel gets to keep $10.395.

In other words, it may be that some sort of ARM license arbitrage play makes Intel and Apple natural partners in this game.

2) Low power X86. Intel has to make low power X86 work. Sure, they can always shift back to ARM, but they are always looking over their shoulder at AMD and Via, and you know those guys are working on low power X86 as well. If they make good low power x86, Apple is a natural customer across the entire product line. Might as well take care of the customer by selling him something he can use now, until you have the thing you think he really wants.

There’s probably more profit in the 32 GB flash for an iPad than in the CPU. Intel is quite interested in that business. In any case, Intel builds chips and Apple needs chips, and they are both big fish who have a record of making money together. I think they both know what they are doing in this instance and can easily believe it is more of a collaboration than a case of one of them “needing” the other.

Low power x86 is a bit of a fundamental problem. ARM architecture and instruction set is simply way too superior in the low power game. The flash business is an ideal compliment to the CPU business given that intel builds it own fabs and needs to keep them full.

As for scaling, intel has normally been ahead in ramping up their technologies with yield, followed by a few months gap with TSMC, and UMC. That is the historic pattern which I believe still persists. Intel also has HiK metal gate technology which helps drastically kill static power consumption if apple decides to go that route.

I am convinced that apple needs intel more than intel needs apple in this.

As for the ARM-related licensing information you mention, you are probably much better informed on this than I am. I take a higher level view of things. ARM is a disruptive technology and the only credible challenge to intel’s dominance. It isn’t in intel’s interest to help ARM grow and if they do (because apple is too big volume-wise to ignore), I am sure they will do it at a huge premium. Could apple be working on a proprietary, non ARM, CPU . Maybe. We don’t know. If they are, I’d buy the “collaboration” theory.

> Low power x86 is a bit of a fundamental problem. ARM architecture and instruction set is simply way too superior in the low power game.

You’re probably too young to remember, but at one point there was no way that X86 could be as powerful as a RISC architecture. Now there’s no way it can be as low power. So several people say, but it remains to be seen. This guy sums it up pretty well.

The first article is written by a non technical person. I can safely ignore that.

The 3D does indeed provide a fundamental advantage. It is all the more reason why apple needs intel more. My guess though is in 2013 when the first memristor devices ship even the 3D structure might end up becoming much less relevant. Memristor is the only thing that can move us beyond Moore’s law.

Normally you can expect this kind of technology to “trickle down” to the asian fabs (Cross licensing etc) perhaps after some time. Will an x86 produced in 3D (with 38% power saving) beat ARM? I doubt it. Currently ARM is at 20% the power consumption of x86.

> The first article is written by a non technical person. I can safely ignore that.

No, what he says is entirely accurate. Have you looked at the size of the decode logic on the die of a modern x86?

> ARM is a disruptive technology and the only credible challenge to intel’s dominance.

I disagree. I think open source operating systems that can be compiled to run on anything, combined with apps running inside virtual machines that run on anything, are the disruptive technologies, and other software is having to play catch-up, and ARM happened to be in the right place at the right time with some of the right pieces. But software that runs fine on X86 or ARM and doesn’t require the vendor (e.g. google) to maintain separate binaries for different architectures, and in fact Intel has already ported Android to x86. Basically, there is no particular CPU ISA requirement any more and ARM was simply better positioned to take advantage of this than anybody else. But this advantage might not last.

One more thing. The reason RISC failed against CISC in the past was the WinTel effect. Back then there wasn’t anywhere near the amount of open source software which is practically platform-independent, and masses friendly.

The computing devices of today tomorrow run on ARM, and use an open source masses-friendly OS (Android + Linux) that can be ported to any other CPU architecture if need be.

>I disagree. I think open source operating systems that can be compiled to run on anything, combined with apps running inside virtual machines that run on anything, are the disruptive technologies, and other software is having to play catch-up, and ARM happened to be in the right place at the right time with some of the right pieces.

I think both you and uma are both making some valid points. Open source certainly does tend to dissolve attempts at vertical integration and rent collecting, and yay for that – this was part of my sinister master plan :-). But it’s also true that ARM has done a really superb job of agile, lightweight execution (operating as a design studio that licenses its architecture on attractive terms), something that Intel is likely to have trouble matching simply because of its huge mass and comparatively bureaucratized structure.

In theory, yes, Atom and x86 could give ARM a real fight in low-power devices; the software and toolchains are in place. In practice I’m skeptical this will happen soon. Because, while you’re right that ISA coupling to software is mostly over, I don’t think Intel has any prospect of gaining a permanent advantage on the power-per-cycle front, either. I believe ARM is exploiting a situation in which the lower transistor budget for its ISA slightly more than cancels Intel’s lead in process technology

Here’s my reasoning in more detail. You know more about the hardware end of things than I do, so critique it…

Intel may lead in process technology, but this means little if the independent chip foundries are fast enough followers that ARM can buy the same speed-power product a few months later – and so fair, that looks like being the case. For ARM to keep a step ahead of Intel, all that needs to be true is that x86’s higher transistor budget eats more months of gain in speed/power product than Intel’s process-technology lead on the foundries gains it. As long as everyone’s process technology is improving at about the same rate, ARM has a sustainable advantage.

> Intel may lead in process technology, but this means little if the independent chip foundries are fast enough followers that ARM can buy the same speed-power product a few months later – and so fair, that looks like being the case. For ARM to keep a step ahead of Intel, all that needs to be true is that x86?s higher transistor budget eats more months of gain in speed/power product than Intel’s process-technology lead on the foundries gains it. As long as everyone’s process technology is improving at about the same rate, ARM has a sustainable advantage.

This is absolutely correct. The key metric is Speed/Power ratio. On that metric Intel loses even with the process lead advantage they have.

I believe ARM is exploiting a situation in which the lower transistor budget for its ISA slightly more than cancels Intel’s lead in process technology..

In state-of-the-art x86, most of the die (by a large margin) is cache. Decode transistors only matter as far as power, and even that may be fairly minimal. I don’t know for sure, but the point is, neither does anybody else outside of AMD, Intel, or Via. How many times have the x86 architecture and ethernet been declared dead?

Intel may lead in process technology, but this means little if the independent chip foundries are fast enough followers that ARM can buy the same speed-power product a few months later

Interestingly, Intel’s new 3D announcement seems pretty fundamental. I can’t see the video on this machine:

so I’ll have to wait to get home to see how that works. I’m not sure how they create the “wrap-around” structure in processing. But that’s something that could take a very long time for people to play catch-up on, and there will almost certainly be some blocking patents. So, this could be an Intel advantage for a few years, not just months.

For ARM to keep a step ahead of Intel, all that needs to be true is that x86?s higher transistor budget eats more months of gain in speed/power product than Intel’s process-technology lead on the foundries gains it.

AFAIK, Intel and AMD haven’t really tried to do low power in any serious way yet. As I mentioned, instruction decode is really a pretty small part of the package these days. While it’s true that the ARM ISA isn’t in as need of, say, branch prediction, as badly as the Intel ISA, I’m really not sure how a “comparable” ARM and X86 would stack up. The conventional wisdom is that X86 couldn’t compete against RISC at all, but what AMD did (and Intel copied) with X86-64 is a bit more RISC-like, and nothing short of amazing for performance.

As long as everyone’s process technology is improving at about the same rate, ARM has a sustainable advantage.

The thing about the Wintel monopoly is that there is and has been and will always be room at the high end for “something else”, but the X86 vendors, branching out from their market dominant position, ate most of the performance high-end. But they never had to compete too hard at the low-power end, because nothing else would have sufficient performance to work in a laptop. Now that ARM is a very serious competitor, we’ll probably shortly see how well X86 can map to portable processors, with custom designs rather than low-voltage repurposed desktops.

The primary sustainable advantage that ARM currently has over X86 is that any semiconductor company can combine an ARM core with whatever other IP is required for a system, inside a chip, whereas X86 chips are the CPU plus whatever Intel/AMD/Via gives you. The amount of power it takes to get signals out a chip and across a board and into another chip is huge compared to the amount of power it takes to do the same thing on-chip. And any semiconductor company can integrate ARM on-chip with other logic without spending too much — ARM is great about throttling the golden goose just enough to get it to lay another egg.

But even if ARM trounces X86, this isn’t an ARM vs Intel battle by any means. Intel has, presumably, one of the best ARM licenses around, and designers that are probably making really fast versions of it right now.

To the extent that the Intel/Apple collaboration is the start of Intel ramping up its ARM business, I would imagine that Intel will start being a foundry for other companies, allowing them to combine their own peripherals with Intel’s ARM/X86/whatever processors. ARM already does this with TSMC and some other fabs — instead of paying ARM a huge license fee and a small royalty, you can just ride on the fab’s license fee with ARM and pay a bigger per-chip royalty. If Intel has the leading power numbers for an extended period of time, they could capture the market lead in ARM smartphone silicon (at least for the UI processors) quite easily. They could even form a partnership with Broadcom or Marvell or Qualcomm. The industry is historically rife with coopetition like this.

In theory, yes, Atom and x86 could give ARM a real fight in low-power devices; the software and toolchains are in place. In practice I’m skeptical this will happen soon.

Cost, network effects, and lower heat dissipation are what have made ARM win over Atom and x86 on low-power embedded devices.

OTOH, where speed matters much more than power, x86 wins hands down. Thefore I seriously doubt that ARM will ever supplant x86 on laptops or servers. The real question is how much mobile devices will eat into the PC and server business. This actually remains to be seen.

I have been hearing stories about “blocking patents” on new transistor structures and interconnects for years. Remember the copper metal interconnect that IBM came up with. Or the High-K transistor.

Ultimately all these technologies funnel through the foundries. TSMC has high-K flows. There might be few months advantage, perhaps a year, but that is about it.

>The thing about the Wintel monopoly is that there is and has been and will always be room at the high end for “something else”, but the X86 vendors, branching out from their market dominant position, ate most of the performance high-end

You are ignoring the “good enough” effect. X86 ate the high end once it became “good enough” to do so. The volumes at the high end were too small to keep up with Moore’s law and multibillion dollar foundries, and once x86 became good enough (instructions per second wise) it was game over for the high end. The dynamics with ARM are completely different. First, the volume and economies of scale are there. Second, it is a superior architecture. Third, it has a massive infrastructure and support out there. Fourth, it will always be cheaper than x86 because fab R&D is effectively pooled between all the fabless vendors.

Intel moving to ARM is akin to Microsoft ditching all low level layers of crapware that make up windows (kernel etc) and replacing that with the linux kernel.

I have been hearing stories about “blocking patents” on new transistor structures and interconnects for years. Remember the copper metal interconnect that IBM came up with. Or the High-K transistor.

You really confuse me. First you argue that Apple needs Intel, because no other foundries are close. Then you argue that they are never more than a few months out. There are, indeed several semiconductor blocking patents, but they are mostly cross-licensed, and some companies such as TI have collected huge revenues from them.

Your examples may or may not be on point. IBM is pretty good about licensing to just about anybody. Hafnium was being used in dielectrics by TI back in 1992. To your point, a lot of these techniques are owned by companies with overlapping MAD patents. But from what little I’ve read, the new 3D transistors might be fairly fundamental, and Intel is not shy about asserting its intellectual property rights. Even if other companies are doing the same thing a few months later, Intel could certainly be collecting a lot of royalties on the process.

You are ignoring the “good enough” effect. X86 ate the high end once it became “good enough” to do so…. The dynamics with ARM are completely different. First, the volume and economies of scale are there. Second, it is a superior architecture.

I’m not ignoring this. I absolutely agree that volume shipments helped Intel and AMD do the R&D to eat into the high end. But if RISC was as superior as the theory says, then SPARC, MIPS or ARM should have eaten Intel’s lunch before they got that big. In any case, Intel and AMD still have the volume shipments that allow them to do significant research. AMD, in as miserable shape as usual, made a gross profit last year that is 4 times ARM’s revenue. You keep repeating “it is a superior architecture” and dismissing any claims that perhaps, it is just the current implementation that is superior as far as power consumption. But as I already said, I saw this before. There was no way that X86 was going to win against RISC. The motorola 68K, the 88K, the power PC, SPARC… All of those were going to eat Intel’s lunch. And, it was mostly because the X86 architecture is butt-ugly.

Perhaps you are right and Intel and AMD won’t be able or willing to compete in the very low power consumption market. Perhaps you are right that ARM has momentum that none of those other architectures had before (although, for the time, some of them had quite a bit). But perhaps you are misunderstanding the power of “good enough.” An architecture does not have to be beautiful to be competitive, especially in the era of practically free silicon. Just as an abundance of RAM and MIPs changed the software game, so has an abundance of transistors changed the hardware game. In any case, X86-64 is not nearly as ugly as X86-32, which is not nearly as ugly as X86-16, so discounting the ability of Intel and AMD to adapt might be a losing proposition. In the past, they had to maintain strict backward compatibility, but going forward competing with ARM it is not at all impossible that they will eschew backward compatibility for a bit more simplicity.

In superscalar out of order execution engines, as with any complicated software design, the most valuable IP is the verification and validation infrastructure, and neither AMD nor Intel are slouches in that department.

Third, it has a massive infrastructure and support out there. Fourth, it will always be cheaper than x86 because fab R&D is effectively pooled between all the fabless vendors.

The size of ARM’s infrastructure and support is much less than X86, and at some points in its history, X86 support was dwarfed by other CPUs. And I don’t think the Chartered, TSMC, and UMC share that much technology with each other. Last quarter, TSMC made less than 40% what Intel did. So I think that Intel can keep up on the fab side. And AMD is now fabless, sharing whatever fab R&D you think will beat X86 by using TSMC just like half the ARM vendors.

Intel moving to ARM is akin to Microsoft ditching all low level layers of crapware that make up windows (kernel etc) and replacing that with the linux kernel.

Intel will certainly keep selling X86 CPUs that are backward compatible to the 8086. But that’s for the desktop market. As that market shrinks, and servers and handhelds keep growing, I could certainly see either Intel or AMD making forays into, e.g. x86-64 only CPUs. I don’t think for a minute that Intel will move exclusively or even mostly to ARM, but I do think that they will have it in their back pocket. As I mentioned earlier, I think making ARMs for Apple may be a way to transition them to low power X86 later. I know you don’t believe that, but time will tell…

> You really confuse me. First you argue that Apple needs Intel, because no other foundries are close. Then you argue that they are never more than a few months out.

Being 6months to a year ahead is significant in the business that apple is in. Especially if it is an ARM (Ax) vs. another ARM. Apple needs differentiation to hold market share. That is why I argue they need intel more than intel needs them.

> Even if other companies are doing the same thing a few months later, Intel could certainly be collecting a lot of royalties on the process.

That is possible. But even if the foundries end up having to to pay royalties (which I do not predict), I do not believe that it will will not change the big macroeconomic picture that much.

There are so many companies with a vested interest that the foundries keep up. If patent wars ensue there will be plenty of MAD lawsuits in each direction. It’s mostly a few months to a year lead. Which is originally what I claimed on how far intel is ahead of the foundries.

The link seems to support what I suggested to you earlier. That these concepts have been under experimentation for quite some time and everybody’s hand is in them. It is doubtful that intel will be so far ahead because of this.

According to the EE times article intel is claiming as much as a 3-yr advantage. Independent analysts (end of article) claim as much as 2 yrs.
If you filter away the PR and fluff from from these type of announcements you will probably conclude that my 1 yr max estimate is pretty reasonable.

It’s also clear that everybody’s hand is in this. Blocking patents do not seem very likely to me.

Yeah, so to me this all looks like pretty normal cross-industry evolutionary development that various market types are trying to dress up as Company X’s or Company Y’s proprietary breakthrough. Yawn… Of course it involves a clever new geometry, but we’ve seen that song before too. Just get on with it, eh?

Yeah, so to me this all looks like pretty normal cross-industry evolutionary development that various market types are trying to dress up as Company X’s or Company Y’s proprietary breakthrough.

For the most part. Multiple gate FETs have been around forever, as have (discrete) raised FETs. TSMC’s guy apparently coined the term “finfet” and figured out how to make a few, but I think AMD had something similar around the same time or even slightly before. AMD’s guy wasn’t a Berkeley professor with a penchant for self-promotion, though.

The finfet itself is, in some ways, a compromise from the gate-all-around structure, and at least one patent for a method for producing those (probably not very cost-effectively; involved etching a tunnel) was filed in 1994.

It has been pretty obvious for a very long time that, if you could cost-effectively build something like that, it would improve performance. The problem, as usual, has been one of actual implementation of a cost-effective process.

Of course it involves a clever new geometry, but we’ve seen that song before too. Just get on with it, eh?

Several companies have been working on and thinking about this for well over a decade. Intel claims that they will be shipping in volume production by the end of the year.

Any market lead and/or blocking patents that intel has will be on practical ways to build them. They claim a 3% cost adder, which isn’t bad at all. And unless the world changed a lot recently, a 2 year lead would not be unusual; TSMC is usually fairly conservative on this sort of change.

But since uma disagrees with everything I say and thinks that EETimes is gospel, I’ll quote from them on this very issue:

And here’s an article from 2003, with TSMC saying they were going to be using FinFETs at the 65 nm node (didn’t happen) and Intel saying they were going to use their 3D triple-gate at the 45 nm node (also didn’t happen).

So in the grand scheme of things, yes it’s a yawn, technology marches on, but I think it’s exciting to see something like this going into production, even if the first chips might only use them in the cache, because it’s been two or three years out ever since 2000.

> But since uma disagrees with everything I say and thinks that EETimes is gospel, I’ll quote from them on this very issue:

The article refers to 450mm wafers. It has nothing to do with 300mm wafers. 2016 is a reasonable date for the industry (and it’s fine line equipment makers) to shift from 300mm to 450mm. That transition is costly. Billions will be made by the fine line equipment manufacturers in the process.

TSMC seems to think that FinFETs won’t really be needed until 2016 and until 450mm is a reality. It’s possible also that 2D can be competitive with 3D down to 14nm. At least that what some of the technical literature seems to suggest.

I think my 1 yr technology advantage for intel is a reasonable estimate.

The article refers to 450mm wafers. It has nothing to do with 300mm wafers.

No, but it has everything to do with TSMC’s FinFET plans.

TSMC seems to think that FinFETs won’t really be needed until 2016 and until 450mm is a reality. It’s possible also that 2D can be competitive with 3D down to 14nm. At least that what some of the technical literature seems to suggest.

That is what some of the literature suggests. But even back in 2003, Intel was saying that TSMC’s FinFET was too leaky (e.g. didn’t provide enough of an advantage over 2D structures), and Intel’s own 3D tri-gate was much better. Intel seems finally to be putting their money where their mouth is.

I don’t disagree that if someone like TSMC really wanted to, they could do something like a FinFET just for show. In fact, they were doing these for show almost a decade ago. The problem is, that the end-user doesn’t know or care that there’s a 3D transistor in his box, and the direct customers care how well it works and have the wherewithal to measure how well it works and absolutely know how much extra they are paying for it. So semiconductor advancements only ever take place when there is real value in the marketplace.

And other companies are working on other ways to achieve similar performance gains. Freescale had an inverted-T structure in 2005 they claimed would do as well as 3D, but I haven’t been following that. But the largest pure-play foundry currently thinks they need to follow Intel by doing 3D transistor structures, and thinks they will be there in 2015 or 2016.

I certainly agree that if they felt threatened by Intel’s moves, they could get there more quickly, perhaps at the cost of slowing down other innovations. But it’s hard to see that happening right now — there is plenty of other semiconductor business for them, and Intel doesn’t fab for just anybody.

The fact is that Intel perceives value in going to 3D now, and TSMC perceives value in going to 3D in 2015 or 2016. You can dance around that all you want, but it appears that in this one area, Intel has a lead in actually getting an innovation to market that’s much greater than one year. There are several possible reasons for this: for example, it may be that TSMC has other innovations in strained silicon or SOI that Intel doesn’t yet have that mitigate the need to go to 3D at the 20 nm node for them. Or it may just be that they haven’t figured out how to do it with as small a cost adder (3%) as Intel is claiming. Whatever the reason, they have no plans to do this until 2015 or 2016, and by my calculations, that’s more than a year out.

They see no need until 2016 and 450mm. Can they do it earlier if market demands it (e.g. on 300mm flows). I am pretty sure they can.

Intel plans to use these device in the cache on a niche product where there is a plan “B” to use regular cache on that niche product. This is far far from a full CPU built in FinFETs. It was known all along that memory will be the earliest adopters of these structures.

As long as ARM is easily beating Atom in SoCs implemented one or even two nodes behind, the bigger picture does not really change.

There are many “answers” to compete with this 3D FET. ST’s 2D 2layer gate beats 3D. IBM’s flow beats 3D perhaps with another 2-3% cost adder.

This is SO FAR from what you paint it out to be. Add to that that TSMC has already demonstrated memory (SRAM) built in FinFETs in the literature.

If it proves to be vital, expect the competition to be there no later than yr. TSMC’s biggest customers are the ARM vendors. So if it proves to be needed expect them to get there in no time.

One more thing. It looks like 28nm ARMs will be shipping in Q3/Q4 of 2011. This will be really really bad for Intel. At least two foundaries are ramping up. TSMC is one of them and expects 3% revenue from its 28nm Hi K flow in 2011 !!

They see no need until 2016 and 450mm. Can they do it earlier if market demands it (e.g. on 300mm flows). I am pretty sure they can.

Yes, I said that.

Intel plans to use these device in the cache on a niche product where there is a plan “B” to use regular cache on that niche product. This is far far from a full CPU built in FinFETs. It was known all along that memory will be the earliest adopters of these structures.

Yes, I said that too.

As long as ARM is easily beating Atom in SoCs implemented one or even two nodes behind, the bigger picture does not really change.

But again, though I know you disagree, I think there are some implementation changes possible in X86 to make it lower power that we haven’t seen yet.

There are many “answers” to compete with this 3D FET. ST’s 2D 2layer gate beats 3D. IBM’s flow beats 3D perhaps with another 2-3% cost adder.

I said this too. And I concluded that, in the realm of getting 3D transistors to market, Intel was ahead. But I was excited about this because I’ve been following it for a long time.

This is SO FAR from what you paint it out to be.

No, but it is appears to be SO FAR from whatever you read into what I’ve been saying.

Add to that that TSMC has already demonstrated memory (SRAM) built in FinFETs in the literature.

Yes, I may not have said that, but I saw it. But again, they were doing FinFETs a decade ago.

If it proves to be vital, expect the competition to be there no later than yr. TSMC’s biggest customers are the ARM vendors. So if it proves to be needed expect them to get there in no time.

I said that too. Frankly, I think in the current market, none of the fabs need to move that quickly on this — they all have lots of business. Intel getting there earlier is partly a stop-gap measure that will make their X86 more competitive in the short term.

I doubt that Apple would revert their Mac systems to 32-bit, though. What does add some plausibility to this though, is other information I’ve heard that as of Lion, apps built using Xcode and LLVM will no longer contain ARM or x86 code, but rather the LLVM intermediate code, which would get compiled to the host architecture and cached the first time the app is launched.

It’s also possible that the MacBook Air would go to a 64-bit ARM variant, while the MacBook Pro would remain on x86. In any case, the work that Apple’s been doing on LLVM gives them considerable flexibility.

One other possibility, given the CPU design expertise they have in house now, is that Apple’s actually working on an entirely new architecture that maps well to the LLVM virtual machine. That means a stack-based RISC machine.

This is a good analysis. What they do is very similar to the analysis that power and analog IC makers use to define their power management units.

The models are all based on usage patterns, and weighted calculations. This is actually another area where big companies like Apple are seeking differentiation through partnering with IC makers that can give them unique custom power management ICs that are carefully tailored to the usage models they have elaborately developed.

The delta, in power efficiency gains, can be as substantial as the power efficiency gains resulting from being one node ahead in the CPU game.

“I think we’re looking at the end stage of a successful technology disruption on the classic pattern. The question is no longer whether Android can be stopped, but when Apple’s market share will fall off a cliff. I think that could easily happen as soon as the next 90 days; one of the patterns in technology disruptions is that collapse often follows the victim’s best quarter ever.”

It’s now 90 days after. We’ve heard from Apple. Shall we hear from you as well?

I think we’re looking at the end stage of a successful technology disruption on the classic pattern. The question is no longer whether Android can be stopped, but when Apple’s market share will fall off a cliff. I think that could easily happen as soon as the next 90 days; one of the patterns in technology disruptions is that collapse often follows the victim’s best quarter ever.

GOOD ONE. I THINK WE’RE SEEING THE TWO — ANDROID AND IPHONE — ACCELERATE AWAY FROM THE REST OF THE MARKET.

NOW THE IMMEDIATE QUESTION REMAINS, WHAT WILL RESULT FROM THE CURRENT PATENT ISSUES AROUND ANDROID AND WHAT KIND OF REVENUE CAN ANDROID GARNER FOR GOOGLE. IF MICROSOFT AND APPLE EARN MOST OF THE UPFRONT MONEY FROM HANDSET MANUFACTURERS USING ANDROID, WHAT WILL THAT MEAN TO THE OVERALL HEALTH OF ANDROID?

Nielsen’s numbers show that, among users who acquired a new device in the last 3 months, Android share was 27% all phones (not just smart phones). But it was also 27% 3 months earlier—meaning it’s stagnant.

In contrast, during the same time period, iPhone share jumped from 10% to 17%.

Yeah, the iPhone is getting crushed by Android – Apple sold a mere 20.34 million iPhones last quarter. After these poor results expect an announcement any day that Apple is discontinuing the iPhone. :-)

Tip Jar

Donate here to support my open-source projects. Small but continuing donations via gittip help more than one-time donations via PayPal.

Random Quote

Of all the strange ‘crimes’ that human beings have legislated out of nothing, ‘blasphemy’ is the most amazing – with ‘obscenity’ and ‘indecent exposure’ fighting it out for second and third place.— Lazarus Long